the Port of Houston Authority of Harris County, Texas v. Zachry Construction Corporation

Opinion

ACCEPTED 14-10-00708-CV FOURTEENTH COURT OF APPEALS HOUSTON, TEXAS 6/12/2015 5:04:25 PM CHRISTOPHER PRINE CLERK

No. 14-10-00708-CV FILED IN IN THE FOURTEENTH COURT OF APPEALS 14th COURT OF APPEALS HOUSTON, TEXAS HOUSTON, TEXAS 6/12/2015 5:04:25 PM CHRISTOPHER A. PRINE PORT OF HOUSTON AUTHORITY OF HARRIS Clerk COUNTY, TEXAS v.

ZACHRY CONSTRUCTION CORPORATION

On appeal from the 151st Judicial District Court of Harris County, Texas Trial Court Cause No. 2006-72970

ZACHRY CONSTRUCTION CORPORATION’S SUPPLEMENTAL BRIEF OF APPELLEE

GIBBS & BRUNS, LLP REYNOLDS FRIZZELL, LLP Robin C. Gibbs Brandon T. Allen State Bar No. 0785300 State Bar No. 24009353 rgibbs@gibbsbruns.com ballen@reynoldsfrizzell.com Jennifer Horan Greer 1100 Louisiana, Suite 3500 State Bar No. 00785611 Houston, Texas 77002 jgreer@gibbsbruns.com Phone: (713) 485-7200 Sydney G. Ballesteros Fax: (713) 485-7520 State Bar No. 24036180 sballesteros@gibbsbruns.com ALEXANDER DUBOSE Michael R. Absmeier JEFFERSON & TOWNSEND LLP State Bar No. 24050195 Douglas W. Alexander mabsmeier@gibbsbruns.com State Bar No. 00992350 Amanda B. Nathan dalexander@adtappellate.com State Bar No. 00784662 515 Congress Avenue, Suite 2350 anathan@gibbsbruns.com Austin, Texas 78701-3562 1100 Louisiana, Suite 5300 Phone: (512) 482-9301 Houston, Texas 77002 Fax: (512) 482-9303 Phone: (713) 650-8805 Fax: (713) 750-0903

ORAL ARGUMENT REQUESTED

IDENTITY OF PARTIES AND COUNSEL

1. Petitioner: Zachry Construction Corporation

Represented in the trial court and on appeal by:

Robin C. Gibbs Brandon T. Allen State Bar No. 07853000 State Bar No. 24009353 rgibbs@gibbsbruns.com REYNOLDS FRIZZELL, L.L.P. Jennifer Horan Greer 1100 Louisiana, Suite 3500 State Bar No. 00785611 Houston, Texas 77002 jgreer@gibbsbruns.com Phone: (713) 485-7200 Sydney G. Ballesteros Fax: (713) 485-7250 State Bar No. 24036180 Email: ballen@reynoldsfrizzell.com sballesteros@gibbsbruns.com Michael R. Absmeier State Bar No. 24050195 mabsmeier@gibbsbruns.com Amanda B. Nathan State Bar No. 00784662 anathan@gibbsbruns.com GIBBS & BRUNS L.L.P. 1100 Louisiana, Suite 5300 Houston, Texas 77002 Phone: (713) 650-8805 Fax: (713) 750-0903

Represented on appeal by:

Douglas W. Alexander State Bar No. 00992350 dalexander@adtappellate.com ALEXANDER DUBOSE JEFFERSON & TOWNSEND LLP 515 Congress Avenue, Suite 2350 Austin, Texas 78701-3562 Phone: (512) 482-9301 Fax: (512) 482-9303

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2. Respondent: Port of Houston Authority of Harris County, Texas

Represented in the trial court and on appeal by:

Marie R. Yeates David E. Keltner State Bar No. 22150700 State Bar No. 11249500 myeates@velaw.com david.keltner@kellyhart.com Catherine B. Smith Marianne Auld State Bar No. 03319970 State Bar No. 01429910 csmith@velaw.com marianne.auld@kellyhart.com VINSON & ELKINS L.L.P. KELLY HART & HALLMAN LLP 1001 Fannin, Suite 2500 201 Main Street, Suite 2500 Houston, Texas 77002 Fort Worth, Texas 76102 Phone: (713) 758-4576 Phone: (817) 878-3560 Fax: (713) 615-5544 Fax: (817) 878-9760

Michael A. Heidler Bill Sims State Bar No. 24059921 State Bar No. 18429500 mheidler@velaw.com bsims@velaw.com VINSON & ELKINS L.L.P. VINSON & ELKINS L.L.P. 2801 Via Fortuna, Suite 100 2001 Ross Avenue, Suite 3700 Austin, Texas 78746 Dallas, Texas 75201 Phone: (512) 542-8579 Phone: (214) 220-7703 Fax: (512) 236-3217 Fax: (214) 999-7703

Karen L.T. White David H. Brown State Bar No. 20274500 State Bar No. 03109200 karen@kltwpc.com dbrown@bkllp.com KAREN L.T. WHITE, P.C. BROWN & KORNEGAY LLP 2777 Allen Parkway, Suite 977 2777 Allen Parkway, Suite 977 Houston, Texas 77019 Houston, Texas 77019 Phone: (832) 646-4667 Phone: (713) 528-3703 Fax: (713) 528-3701

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Represented in the trial court by:

Lawrence J. Fossi State Bar No. 97280650 lfossi@fossijewell.com FOSSI & JEWELL LLP 4203 Yoakum Boulevard, Suite 100 Houston, Texas 77006 Phone: (713) 529-4000 Fax: (713) 529-4094

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TABLE OF CONTENTS

IDENTITY OF PARTIES AND COUNSEL .......................................................... i

TABLE OF CONTENTS .......................................................................................iv

INDEX OF AUTHORITIES............................................................................... viii STATEMENT OF THE CASE ............................................................................xiv ISSUES PRESENTED........................................................................................xvii

STATEMENT OF FACTS ..................................................................................... 1 I. PHA hires Zachry to construct a wharf and understands Zachry plans to use a freeze-wall means and methods. ..................................................... 1

II. The Contract makes Zachry solely responsible for choosing the means and methods of construction and precludes PHA control. ........................... 4

III. PHA belatedly adds an extension to the wharf design and recognizes only Zachry can timely build it and only with the frozen-cutoff wall. ........ 5

IV. PHA conceals its unsubstantiated “concerns” about the frozen-cutoff wall to induce Zachry into agreeing to build the extension. ........................ 8

V. PHA waits to reject the frozen-cutoff wall until after Zachry is bound by CO4, which plainly incorporates the frozen-cutoff wall. ...................... 11 VI. PHA issues its R&R Order, which everyone understands rejected the frozen-cutoff wall and which Zachry makes clear to PHA constitutes a breach. ......................................................................................................... 15

VII. PHA’s rejection of the frozen-cutoff wall forces Zachry to complete construction in the wet. ............................................................................... 16

VIII. Working in the wet causes Zachry substantial damages for which it sues.............................................................................................................. 21

SUMMARY OF ARGUMENT ............................................................................ 24 ARGUMENT ........................................................................................................ 26

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I. Ample evidence supports the jury’s breach-of-contract findings. ............. 26

A. Section 5.10 prohibited PHA’s R&R Order, and no other Contract provision authorized it. ...................................................... 26

1. Section 5.10 forbids PHA control of Zachry’s means and methods. ................................................................................. 26 2. Section 4.07 forbids PHA control over Zachry’s health-

and-safety plans...................................................................... 28

3. None of PHA’s other cited provisions authorize the R&R Order. ..................................................................................... 29

4. PHA is not remediless. ........................................................... 32

5. The drilled-shaft submittal is consistent with Zachry’s reading. ................................................................................... 32

B. PHA’s R&R Order breached CO4. .................................................. 33 C. Question 1 was proper. ..................................................................... 35

II. The jury's verdict on causation and damages is supported by the evidence. ..................................................................................................... 35

A. Draper’s assumptions on damages were supported by the evidence and did not vary materially from undisputed facts. .......... 36 1. Draper’s treatment of freeze-pipe removal was supported by the evidence....................................................................... 37

2. Draper’s treatment of sheet-pile installation was supported by the evidence...................................................... 39

B. The evidence establishes causation. ................................................. 40

1. Ample evidence supported the jury’s causation finding........ 40

2. PHA’s “Contract completion deadline” argument fails......... 41

3. PHA’s “alternative cause” argument fails. ............................ 42 C. PHA’s lack-of-authority argument does not defeat causation. ........ 43

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III. Sections 5.41 and 5.42 do not bar Zachry’s breach-of-contract claim. ...... 45

A. The “changes” clauses are inapplicable by their terms. ................... 45

B. Alternatively, common-law and statutory rules preclude application of the “changes” clauses here. ....................................... 48

1. The Shintech doctrine. ........................................................... 48 a. Green does not preclude application of Shintech. ....... 49 b. Technip does not preclude application of Shintech. .... 50

2. The radical-change doctrine................................................... 51 3. Section §16.071...................................................................... 52

C. The “changes” clauses were not tried. ............................................. 53

D. If the trial court erred, remand—not rendition—is required............ 54

E. Zachry’s failure to seek a §5.08 extension was irrelevant. .............. 54

IV. The trial court did not abuse its discretion in excluding PHA’s $8.6 million in alleged harms claimed as offsets. .............................................. 55

V. PHA’s “open-the-door” theory did not support admission of PHA’s alleged harms regarding the no-damages-for-delay exceptions. ................ 58

A. The trial court properly excluded PHA’s actual-harms evidence under Rule 403. ................................................................................ 58 B. Any error was harmless. ................................................................... 60

VI. The trial court did not err in instructing the jury as to fraud. ..................... 60 A. The Supreme Court approved the recklessness instruction. ............ 60

B. No charge error tainted the no-damages-for-delay exceptions. ....... 61

VII. The apparent-authority instructions were proper. ...................................... 62

A. Apparent authority is a fact issue. .................................................... 62

B. Zachry pleaded apparent authority. .................................................. 63

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VIII. PHA is not entitled to attorneys’ fees if Zachry prevails on any theory. ... 64

IX. Zachry’s recovery on its pass-through claim should be affirmed. ............. 67

A. Zachry asserts a valid pass-through claim. ...................................... 67

B. The Court correctly charged the jury on pass-through. ................... 70

C. Waiver of immunity applies to the pass-through claims.................. 70 PRAYER ............................................................................................................... 71 CERTIFICATE OF SERVICE ............................................................................. 72

CERTIFICATE OF COMPLIANCE .................................................................... 74

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INDEX OF AUTHORITIES

Cases 4901 Main, Inc. v. TAS Automotive, 187 S.W.3d 627 (Tex. App.—Houston [14th Dist.] 2006, no pet.) .....................65 Abraxis Petrol Corp. v. Hornburg, 20 S.W.3d 741 (Tex. App.—El Paso 2000, no pet.) ............................................41 Allison v. Service Lloyds Ins., 437 S.W.3d 589 (Tex. App.—Houston [14th Dist.] 2014, pet. denied) ...............64

Alvarado v. Farah Mfg., 830 S.W.2d 911 (Tex. 1992) ................................................................................55

America’s Favorite Chicken Co. v. Samaras, 929 S.W.2d 617 (Tex. App.—San Antonio 1996, writ denied) .................... 39, 40

American Airlines Employee Federal Credit Union v. Martin, 29 S.W.3d 86 (Tex. 2000) ....................................................................................52

Atwood Oceanics v. Zust Bachmeier, 2007 WL 2766192 (5th Cir. 2007) ........................................................................52

B.F.&C.M. Davis v. W.E. Callaghan Constr., 298 S.W. 273 (Tex. Comm’n App. 1927) ............................................................51

Beneficial Personnel Servs. v. Rey, 927 S.W.2d 157 (Tex. App.—El Paso 1996, vac. w.r.m.) ...................................61

Bhatia v. Woodlands North Houston Heart Center, 396 S.W.3d 658 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) ...............67

Board of Regents v. S&G Constr. Co., 529 S.W.2d 90 (Tex. Civ. App.—Austin 1975, writ ref’d n.r.e.) ............................................................................................ 46, 47, 48, 49, 50

Burroughs Wellcome v. Crye, 907 S.W.2d 497 (Tex. 1995) ................................................................................36

Chapapas v. Delhi Taylor Oil, 323 S.W.2d 64 (Tex. Civ. App.—San Antonio 1959, writ ref'd n.r.e.) ...............64 viii

City of San Antonio v. Valemas, 2012 WL 2126932 (Tex. App.—San Antonio 2012, no pet.) ....................... 70, 71

County of Dallas v. Wiland, 216 S.W.3d 344 (Tex. 2007) ................................................................................54

Cox v. Humble Oil & Refining, 16 S.W.2d 285 (Tex. Comm’n App. 1929) ..........................................................64

Criswell v. European Crossroads Shopping Center, 792 S.W.2d 945 (Tex. 1990) ................................................................................48

Douglass v. Panama, 504 S.W.2d 776 (Tex. 1974) ................................................................................62

Equitable Life Assur. Society v. Ellis, 147 S.W. 1152 (Tex. 1912) ..................................................................................62 Flagship Hotel. v. City of Galveston, 117 S.W.3d 552 (Tex. App.—Texarkana 2003, pet. denied).................. 65, 66, 67 Frost Nat’l Bank v. L&F Distrib’rs, 165 S.W.3d 310 (Tex. 2005) ......................................................................... 26, 47 Ft. Worth ISD v. City of Ft. Worth, 22 S.W.3d 831 (Tex. 2000) ..................................................................................53 Galveston I.S.D. v. Clear Lake Rehab. Hosp., 324 S.W.3d 802 (Tex. App.—Houston [14th Dist.] 2010, no pet.) ......................70

Gen. Elec. Co. v. Moritz, 257 S.W.3d 211 (Tex. 2008) ..................................................................................5

Green Int’l, Inc. v. Solis, 951 S.W.2d 384 (Tex. 1997) ................................................................................49

Hanks v. GAB Bus. Servs., 644 S.W.2d 707 (Tex. 1982) ................................................................................50

Harris Cty. v. Inter Nos, Ltd., 199 S.W.3d 363 (Tex. Civ. App.—Houston [1st Dist.] 2006, no pet.).................55

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Hayden v. State, 296 S.W.3d 549 (Tex. Crim. App. 2009) .............................................................59

Helena Chemical Co. v. Wilkins, 47 S.W.3d 486 (Tex. 2001) ..................................................................................40

Hensel Phelps Constr. v. McCarthy Bld'g, 2005 WL 1489932 (N.D. Tex. 2005) ...................................................................70

Horizon/CMS Healthcare. v. Auld, 34 S.W.3d 887 (Tex. 2000) ..................................................................................59

In re ADM Inv. Servs., 304 S.W.3d 371 (Tex. 2010) ................................................................................64

Intercontinental Group Ptnrshp. v. KB Home Lone Star, 295 S.W.3d 650 (Tex. 2009) ......................................................................... 65, 66 Interstate Contracting Corp. v. City of Dallas, 135 S.W.3d 605 (Tex. 2004) .................................................... xxiv, 25, 68, 69, 71 Iron Mtn. Bison Ranch v. Easley Trailer Mfg., 42 S.W.3d 149 (Tex. App.—Amarillo 2000, no pet.) ..........................................64 Kiefer v. Continental Air., 10 S.W.3d 34 (Tex. App.—Houston [14th Dist.] 1999, pet. denied)....................35

Mann v. Fitzhugh-Straus Medina Ranch, 640 S.W.2d 367 (Tex. App.—San Antonio 1982, no writ) .................................61 McCreary v. Bay Area Bank & Trust, 68 S.W.3d 727 (Tex. App.—Houston [14th Dist.] 2001, pet. dism’d) .................26

Nat’l Env’l Serv. v. Homeplace Homes, 961 S.W.2d 632 (Tex. App.—San Antonio 1998, no writ) .................................52

North Harris County Jr. College Dist. v. Fleetwood Constr. Co., 604 S.W.2d 247 (Tex. Civ. App.—Houston [14th Dist.] 1980, writ ref’d n.r.e.) .....................................................................................................................49

Pace Concerts v. Resendez, 72 S.W.3d 700 (Tex. App.—San Antonio 2002, pet. denied) .............................63

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Paramount Nat’l Life Ins. v. Williams, 772 S.W.2d 255 (Tex. App.—Houston [14th Dist.] 1989, writ denied) ...............62

Prodigy Comms. Corp. v. Agricultural Excess & Surplus Ins., 288 S.W.3d 374 (Tex. 2009). ...............................................................................54

Provident Life & Accident Ins. v. Hazlitt, 216 S.W.2d 805 (Tex. 1949) ................................................................................53

Robinson v. Lubbering, 2011 WL 749197 (Tex. App.—Austin 2011, no pet.) .........................................55

Secure Comm. v. Anderson, 31 S.W.3d 428 (Tex. App.—Austin 2000, no pet.)..............................................55

SEECO, Inc. v. K.T. Rock, 416 S.W.3d 664 (Tex. App.—Houston [14th Dist.] 2013, pet. denied) ...............67

Shintech, Inc. v. Group Constructors, Inc., 688 S.W.2d 144 (Tex. App.—Houston [14th Dist.] 1985, no writ)............... 46, 49

Shupe v. Lingafelter, 192 S.W.3d 577 (Tex. 2006) ................................................................................35 Solar Soccer Club v. Prince of Peace Luth. Church, 234 S.W.3d 814 (Tex. App.—Dallas 2007, pet. denied) .....................................65

Sprague v. Sprague, 363 S.W.3d 788 (Tex. App.—Houston [14th Dist.] 2012, pet. denied) ...............57

State v. F&C Eng’g, 438 S.W.2d 647 (Tex. Civ. App.—Houston [14th Dist.] 1969, writ ref’d n.r.e.) .....................................................................................................................47

State v. Martin Bros., 160 S.W.2d 58 (Tex. 1942) ..................................................................................47 Structural Metals, Inc. v. S&C Elec. Co., 590 Fed. Appx. 298 (5th Cir. 2014) ......................................................................65

Taber v. W. Union Tele. Co., 137 S.W. 106 (Tex. 1911) ....................................................................................52

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Tennessee Gas Pipeline v. Technip USA Corp., 2008 WL 3876141 (Tex. App.—Houston [1st Dist.] 2008, pet. denied) .............50

The Port of Houston Authority of Harris County v. Zachry Construction Corp., 377 S.W.3d 841 (Tex. App.—Houston [14th Dist.] 2012, pet. filed) ........... xv, 23

Thota v. Young, 366 S.W.3d 678 (Tex. 2012) ......................................................................... 61, 62

West v. Triple B Servs., LLP, 264 S.W.3d 440 (Tex. App.—Houston [14th Dist.] 2008, no writ)......................49

Zachry Construction Corp. v. The Port of Houston Authority of Harris County, 449 S.W.3d 98 (Tex. 2014) ............... xv, 1, 5, 9, 11, 12, 15, 16, 21, 23, 27, 60, 61

Statutes TEX. CIV. PRAC. & REM. CODE §16.071(a) ..............................................................52 TEX. LOC. GOV’T CODE §271.151(2) .......................................................................45

TEX. LOC. GOV’T CODE §271.152 ..................................................................... 45, 70 TEX. LOC. GOV’T CODE §271.153(a)(1) ...................................................................62

TEX. LOC. GOV’T CODE §271.153(a)(2) ...................................................................62 TEX. WATER CODE §60.408(i) .................................................................................45

Rules TEX. R. CIV. P. 193.1 ................................................................................................55

TEX. R. CIV. P. 193.6 ................................................................................................55

TEX. R. CIV. P. 194.2(c) ...........................................................................................55 TEX. R. CIV. P. 194.2(d) ...........................................................................................55

TEX. R. CIV. P. 403 ...................................................................................................54

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Other Authorities 1 BRUNER & O’CONNOR CONSTR. LAW §4.23 .........................................................46

Brown & Rondon, TEXAS RULES OF EVIDENCE HANDBOOK §107 (2015) ...............59

Goode, Wellborn & Sharlot, 1 TEX. PRAC.: TEX. RULES OF EVID. 107.1 (3d ed. 2015) .....................................................................................................................59

McCormick, The New Code of Evidence, TEX. L REV. 661, 673 (June 1942) ........60

TEX. P.J.C. BUSINESS §105.2 (2014) ........................................................................61

TEX. P.J.C. BUSINESS §105.3B (2014) .....................................................................61

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STATEMENT OF THE CASE

Nature of Case: Appellee Zachry Construction Corporation (“Zachry”), a contractor, sued Appellant Port of Houston Authority of Harris County, Texas (“PHA”) for damages arising out of PHA’s breach of its contract with Zachry, pursuant to which Zachry promised to construct a wharf and PHA promised not to interfere with Zachry’s means and methods of construction.

Trial Court: Hon. Mike Engelhart, 151st Judicial District, Harris County.

Jury Verdict: The jury found PHA breached both §5.10 of the Bayport Terminal Complex Phase 1A Wharf and Dredging Contract (“the Contract”) and Change Order 4 thereto. CR59:17390- 91(A4).1 The jury further (1) awarded Zachry $18,602,697 in damages, CR59:17392-93(A4);2 (2) found that PHA’s breach was not excused by waiver, equitable estoppel, quasi-estoppel, release, or fraudulent inducement, CR59:17396-99(A4); (3) found that PHA did not fail to comply with the Contract by withholding $600,000 for dredging from PHA’s payment on amounts invoiced by Zachry, CR59:17402(A4); (4) with respect to the trial court’s determination that PHA failed to comply with the Contract by failing to pay Zachry $2.36 million that PHA withheld as liquidated damages, found (a) PHA’s breach was excused to the extent of $970,000 that PHA withheld from payments to Zachry for allegedly defective fenders, and (b) PHA’s breach was not excused based on release, CR59:17405-06(A4); and (5) found the reasonable fees for the necessary services of PHA’s attorneys totaled $10,697,750 for all stages of litigation and breach of contract theories, CR59:17407-08(A4).

Judgment: Judge Engelhart rendered judgment on the verdict, awarding

1 Abbreviations in this brief are the same as in Zachry’s previously filed briefs in this case. “PHASupp.” refers to PHA’s Post-Remand Supplemental Brief of Appellant. 2 The jury found 58.13% of these damages to be delay damages, CR59:17394(A4), but the trial court entered an agreed order disregarding the jury’s answer, finding that 100% of those damages were conclusively established to have been delay damages, CR60:17526.

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Zachry $19,992,697 in damages, which the court calculated by adding the $2.36 million in improperly withheld liquidated damages the court awarded Zachry on directed verdict plus the $18,602,697 jury award for a total of $20,962,697, and then deducting the $970,000 offset found by the jury. CR62:18166(A1). The court declined to award Zachry the $600,000 that Zachry claimed PHA wrongfully withheld from Zachry’s payments but that the jury had declined to award to Zachry. Id. The court also declined to award PHA attorneys’ fees. CR62:18163-67(A1). The court awarded pre- and post- judgment interest and taxable costs. CR62:18166-67(A1).

Court of Appeals: PHA appealed, and Zachry cross-appealed. CR64:18706-11;

CR64:18925-27. A panel of the Fourteenth Court of Appeals consisting of Justices McCally, Christopher, and Boyce heard oral argument. In an opinion authored by Justice McCally, the Panel reversed and rendered judgment against Zachry, holding that (1) the no-damages-for-delay provision in §5.07 of the Contract precluded Zachry’s damages as a matter of law, (2) Zachry unambiguously released its claims for liquidated damages and for $600,000 withheld for dredging (Christopher, J., dissenting), (3) the trial court did not err in offsetting the judgment against PHA by $970,000 for allegedly defective wharf fenders, and (4) PHA should recover its attorneys’ fees from Zachry. The Port of Houston Authority of Harris County v. Zachry Construction Corporation, 377 S.W.3d 841 (Tex. App.—Houston [14th Dist.] 2012), rev’d, 449 S.W.3d 98 (Tex. 2014)(A2).

Supreme Court: In a 5-4 decision, the Supreme Court reversed the Fourteenth Court’s judgment. Zachry Construction Corporation v. Port of Houston Authority of Harris County, 449 S.W.3d 98, 119-20 (Tex. 2014)(A3). In an opinion authored by Justice Hecht, the majority held that Zachry’s claim for delay damages was not barred by governmental immunity or by the no-damages-for- delay provision of the Contract. It also held that Zachry was entitled to recover liquidated damages withheld by PHA, but that there was some evidence to support the jury’s award of the $970,000 offset for allegedly defective wharf fenders. Finally, xv it concluded that PHA was not entitled to attorneys’ fees. Because PHA had raised a number of other issues, the Supreme Court remanded the case to the Fourteenth Court for further consideration. Id. at 120(A3).

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ISSUES PRESENTED

1. Breach of §5.10. The jury’s finding in Question 1 that PHA failed to

comply with §5.10 of the Contract is supported by factually and legally sufficient

evidence, because, inter alia,

(a) §5.10 provided PHA had no “right to control” Zachry's means and

methods,

(b) no other provision of the Contract gave PHA such a right of control,

and

(c) the evidence established that PHA exercised control over Zachry’s

means and methods by issuing a revise-and-resubmit order (“R&R

Order”) in response to Zachry's frozen-cutoff wall design. See

Argument Part I.A.

2. Breach of CO4. The jury’s finding that PHA failed to comply with Change

Order 4 (“CO4”) is supported by factually and legally sufficient evidence, because,

inter alia, PHA only challenges Zachry's interpretation of the change order—not

whether PHA failed to comply with it—and the evidence established that PHA

agreed in CO4 that Zachry could use the frozen-cutoff wall embodied in the

September 9 design, thereby obviating any purported right PHA had to issue the

R&R Order. See Argument Part I.B.

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3. Instruction in Question 1. The trial court did not abuse its discretion in

instructing the jury in Question 1 that it was “not being asked to decide whether

PHA failed to comply with §5.10.” See Argument Part I.C.

(a) The instruction properly clarified that the jury was being asked to

decide in Question 1 whether CO4 gave Zachry the right to use the

frozen-cutoff wall embodied in the Sept. 9 design, and if so, whether

PHA failed to comply with such a right, as distinguished from the

question whether PHA complied with §5.10, which the jury

considered in Question No. 2. See Argument Part I.C.

(b) PHA has not shown and cannot show reversible error, because the

jury found in Question 2 that PHA failed to comply with §5.10;

Zachry was entitled to a directed verdict on its claim for breach of

CO4, and Question 1 should not have been submitted; and PHA has

not otherwise shown harm. See Argument Part I.C.

4. Damages. The evidence was legally and factually sufficient to support the

jury's finding of damages in Question 3. See Argument Part II.A. And the trial

court did not abuse its discretion in refusing to exclude Draper’s testimony. See

Argument Part II.A.

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5. Causation. The evidence was legally and factually sufficient to support the

jury’s finding that PHA’s failure to comply with §5.10 and/or CO4 caused

Zachry’s damages. See Argument Part II.B.

(a) Zachry offered sufficient evidence to support the jury’s finding of

causation, and expert testimony was not required. See Argument Part

II.B.

(b) PHA waived its argument that Zachry was required to prove that,

absent PHA’s breach, it would have completed all of Milestone-A in

the dry before either February 15 or May 15, 2006. See Argument

Part II.B.

(c) The trial court did not abuse its discretion in charging the jury as to

apparent authority, and PHA shows no harm. See Argument Part II.C.

6. Sections 5.41/5.42. The trial court did not err in holding that §§5.41/5.42

(and §5.52 to the extent it imposes the same requirements as §5.41) do not bar

Zachry’s breach-of-contract claim based on the R&R Order. See Argument Part

III.

(a) The plain language of §§5.41/5.42 applies to changes during the

performance of the Contract, not to PHA’s breach of contract. See

Argument Part III.A.

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(b) The Shintech rule precludes application of §§5.41/5.42 to bar

Zachry’s breach-of-contract claim. See Argument Part III.B.1.

(c) The radical-change doctrine precludes application of §§5.41/5.42 to

bar Zachry’s breach-of-contract claim. See Argument Part III.B.2

(d) Section 16.071 of the Texas Civil Practice and Remedies Code

precludes application of §5.42 to bar Zachry’s breach-of-contract

claim. See Argument Part III.B.3.

(e) Zachry’s compliance with §§5.41/5.42 was not tried to the jury

because the trial court ruled before trial that §§5.41/5.42 were invalid

and/or inapplicable, the jury was instructed that it could only consider

§§5.41/5.42 for state of mind, and no jury question was submitted

regarding §§5.41/5.42. Even if §5.42 could be considered to have

been tried in such circumstances, there was factually and legally

sufficient evidence that Zachry substantially complied with §5.42.

See Argument Part III.C.

(f) Because §§5.41/5.42 were inapplicable, the trial court did not abuse

its discretion in instructing the jury that, to recover its damages from

the R&R Order, Zachry was not required to obtain a §5.41 change

order or give §5.42 notice, but could consider these provisions only in

xx

assessing state of mind, and PHA shows no harm. See Argument Part

III.

(g) Even if PHA could establish error with respect to §§5.41/5.42, the

proper remedy is remand, not rendition. See Argument Part IV.D.

7. Section 5.08. The trial court did not abuse its discretion in excluding

evidence that Zachry did not seek an extension of time under §5.08 for PHA’s

breach of contract, given that §5.08 does not apply to breaches of contract and is

thus irrelevant; any probative value of such evidence is outweighed by the danger

of unfair prejudice to Zachry; and PHA has shown no harm, because the evidence

is not controlling on a dispositive, material issue, nor did it probably cause the

rendition of an improper judgment. See Argument Part IV.E.

8. Exclusion of $8.6 Million in Alleged Harms. The trial court did not abuse

its discretion in excluding PHA's claimed $8.6 million in alleged “actual harms”

claimed as offsets based on PHA’s failure to timely disclose any intent to seek

these harms as an offset defense to be deducted from Zachry’s damages award.

PHA is not entitled to a new trial to try an additional offset defense based on the

trial court’s exclusion of PHA’s claimed harms. See Argument Part IV.

9. PHA’s Open-the-Door Theory. The trial court did not abuse its discretion in

excluding a subset of PHA’s claimed actual-harms evidence with respect to the

xxi

arbitrary-and-capricious and bad-faith no-damages-for-delay exceptions despite

finding that the “door” had been “opened.” See Argument Part V.

(a) There was no misimpression to correct, because Zachry only argued

that PHA promised that it would not charge liquidated damages if the

crane-ship could dock when it arrived—not that PHA would not

charge LDs if it suffered no harm at all. See Argument Part V.A.

(b) In any event, the probative value of PHA’s actual-harms evidence in

refuting any minor misimpression would be substantially outweighed

by undue delay and the danger of unfair prejudice to Zachry. See

Argument Part V.A.

(c) Any error in excluding the evidence was harmless. See Argument

Part V.B.

10. Recklessness instruction. The trial court did not err in instructing the jury

that recklessness could support fraud based on a promise made with an intent not

to perform. And PHA shows no harm. See Argument Part VI.

(a) The Texas Supreme Court held that the trial court properly instructed

the jury as to the no-damages-for-delay exceptions, including fraud.

See Argument Part VI.A.

(b) The instruction was consistent with Texas law and the pattern charge.

See Argument Part VI.A.

xxii

(c) There is factually and legally sufficient evidence that PHA

intentionally defrauded Zachry (as PHA claims it must be defined) by

entering into CO4 with no intent to perform. See Argument Part

VI.B.

(d) Even if error, remand for a new trial is not necessary, because the

Court can be reasonably certain that the jury was not significantly

influenced by the fraud issue. See Argument Part VI.B.

(e) PHA’s evidentiary challenge to the fraud finding is limited to the

sufficiency of the evidence to show that PHA knew that CO4 included

an agreement that Zachry could use the frozen-cutoff wall, because

that was the only basis for its evidentiary challenge in its original

Brief of Appellant. See Aple.Br:48.

11. Apparent Authority Instruction. The trial court did not err in instructing the

jury on apparent authority. See Argument Part VII.

(a) Apparent authority is a fact issue, and there was factually and legally

sufficient evidence that CH2M-Hill had apparent authority. See

Argument Part VII.A.

(b) The trial court did not abuse its discretion in finding that Zachry

pleaded apparent authority. See Argument Part VII.B.

xxiii

(c) Any error in instructing the jury regarding apparent authority is

harmless. Aple.Br:73-74.

12. Attorneys’ fees. PHA is not entitled to attorneys’ fees if any judgment is

entered for Zachry in this case. See Argument Part VIII.

13. Pass-through damages. The trial court properly entered judgment allowing

Zachry to recover damages that were incurred by the subcontractor that it created

in a corporate reorganization and that performed some of the Contract work

pursuant to a “pass-through agreement” with Zachry, as authorized by Interstate

Contracting Corp. v. City of Dallas, 135 S.W.3d 605, 610 (Tex. 2004). See

Argument Part IX.

(a) Zachry asserted a valid pass-through claim. See Argument Part IX.A.

(b) The trial court did not abuse its discretion in instructing the jury with

respect to the pass-through damages. See Argument Part IX.B.

(c) Governmental immunity does not bar Zachry's pass-through claim.

See Argument Part IX.C.

14. Waiver. PHA cannot obtain reversal of the judgment based on arguments

not raised in the trial court, errors as to which PHA has shown no harm, errors

raised for the first time in its supplemental brief, and errors as to which PHA on

appeal has provided no meaningful argument and/or has not cited authority or

evidence.

xxiv

STATEMENT OF FACTS

In the Supreme Court, PHA and Zachry briefed the facts pertaining to

PHA’s multiple issues, all of which PHA raises again here. The Court observed

the evidence “was hotly disputed” and the standard of review required it to view

disputed evidence in Zachry’s favor:

In reviewing any case tried to a jury, we must view the evidence “in the light most favorable to the verdict”—in this case a verdict for [Zachry]—“crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not”....

Zachry, 449 S.W.3d at 101 n.3(A3). The Court recited the evidence “in that light.”

Id.

The same standard applies to this Court’s review on remand. Yet PHA

never mentions the governing standard and ignores the Supreme Court’s factual

recitations pursuant to it. As a result, PHA erroneously portrays the evidence in

the light most favorable to PHA, not Zachry.

This fact statement comports with the standard governing this Court’s

review on remand.

I. PHA hires Zachry to construct a wharf and understands Zachry plans to use a freeze-wall means and methods. In 1999, PHA hired DMJM to design a 1660-foot wharf. 6:8-9, 90. The

project was subsequently delayed five years. 67:40-41; PX466.0004. In 2004,

PHA hired CH2M-Hill as construction manager—PHA’s on-site representative

2

and primary point-of-contact with the project’s general contractor (ultimately,

Zachry). 6:84-86; 20:38; 44:43-44.

That same year, PHA chose Zachry to build the wharf because, among other

reasons, Zachry’s unique means and methods of construction—a frozen wall—

used fewer emissions credits, as the freeze-wall would enable Zachry to build the

wharf primarily on dry land (“in the dry”), rather than in the water (“in the wet”).

7:15-16; 39:46.

Zachry’s choice of means and methods was critical to sequencing

construction tasks. The project originally entailed installing the following

alongside the bay:

* a five-section, concrete wharf deck;

* thousands of under-deck concrete drilled shafts, or piers; and

* concrete revetment blocks protecting the under-deck soil slope. 9:25, 27-28, 59-61.

To accomplish these tasks in the dry, Zachry’s unique means and methods

entailed building a frozen, u-shaped soil berm around the construction site to hold

back the bay. 9:58-61. Zachry would sink pipes into the berm and then freeze it

by circulating sub-freezing brine through the pipes. While building the wall,

Zachry would simultaneously build the wharf in the dry behind it, drilling concrete

piers into the ground and then building the deck on top, using the ground as a

concrete form. Zachry would then excavate dirt under the wharf and among the

3

piers using dry-land equipment (e.g., bulldozers). Once the u-shaped berm was

frozen, Zachry could excavate even deeper. As it completed excavation, Zachry

would place revetment on the under-deck slope. Zachry would then breach the

freeze-wall, allowing water to reach the wharf, and then remove the remainder of

the freeze-wall in the wet. See 9:27-28, 59-73.

This plan depended on using the freeze-wall and—importantly—working in

the dry until the freeze-wall was breached: a contractor working in the wet would

never build the piers and deck before excavating, given the difficulty and cost of

excavating and placing revetment underwater, beneath the deck, and among the

piers. 9:76-77; 47:34.

By October 2003, PHA began asking Zachry about the effect of freezing soil

near piers. 7:24-27; 37:31-32; PX49.0002-3; PX67; PX116. Among other

precautions, Zachry and freeze-wall-designer Dan Mageau stated they would keep

frozen soils nine feet away from the drilled shafts “wherever possible.” PX6.006.

Thus, if it were not possible, they would not. 9:149. PHA—which had no soil-

freeze expertise—requested the nine-foot distance, which had no scientific basis.

29:62-63. Mageau, the project’s only soil-freeze expert, established through tests

provided to PHA that “one freeze-thaw cycle does not appear to reduce the shear

strength in the soil.” PX138.0014; PX7.0010; 29:106-08; see 21:112.

PHA and Zachry executed the Contract June 1, 2004. DX1. It was PHA’s

4

form contract. 6:21-24. Given its 5-year delay, PHA imposed a tight, two-year

completion deadline. 6:88; 64:22; DX1-1.0002. There was an interim deadline

(“Milestone-A”) of February 1, 2006 to finish 660 feet of wharf to allow a ship to

deliver cranes from China. 9:79.

II. The Contract makes Zachry solely responsible for choosing the means and methods of construction and precludes PHA control. The freeze-wall (and later, frozen-cutoff wall) was undisputedly Zachry’s

construction means and methods. 6:76; 8:90, 94; 26:123; 37:52-53. Contract

§5.10 made Zachry solely responsible for its means and methods and barred PHA

interference:

The Port Authority shall not have the right to control the manner in which or prescribe the method by which the Contractor performs the Work. As an independent Contractor, the Contractor shall be solely responsible for supervision of and performance of the Work and shall prosecute the Work at such time and seasons, in such order or precedence, and in such manner, using such methods as Contractor shall choose....

DX1-1.0214(A13). 3 Nothing in §5.10 permitted PHA to reject Zachry’s methods.

27:26-27; pp.26-27.

PHA conceded §5.10’s purpose was to “isolat[e] the Port Authority from

having any responsibilities for the contract[or]’s means and methods,” and “keep

the responsibility and liability on [the contractor’s] side of the table.” 8:91, 93; see

6:39-42; 27:6-7. The Supreme Court recognized this “provision benefitted the

3 Emphasis added unless noted otherwise.

5

Port, insulating it from liability to which it would be exposed were it exercising

control over Zachry’s work.” 449 S.W.3d at 102 & n.4(A3)(citing Gen. Elec. v.

Moritz, 257 S.W.3d 211, 214 (Tex. 2008)).

Consistent with this purpose, nothing in the Contract gave PHA the right to

issue the October 11, 2005 revise-and-resubmit order (“R&R Order”). See pp.26-

34. To avoid any claim of control and attendant liability, PHA did not approve or

reject the main freeze-wall, but simply ensured it had been approved by a Texas

Professional Engineer (“PE”) and “accepted [it] for records.” 37:115-16; 44:90;

pp.28-29.

III. PHA belatedly adds an extension to the wharf design and recognizes only Zachry can timely build it and only with the frozen-cutoff wall. Nine months into the Contract—less than a year before Milestone-A—PHA

belatedly realized its 5-year-old wharf design was too short, and added a 332-foot

sixth section. PX130.0004; PX141.0016; 7:34-37. PHA concluded only Zachry

could timely build the extension within emissions limits. PX3(A28); PX224(A24);

8:22-27; 22:103-07; 45:138-40; see 7:37-40, 78; 38:34-35; PX192.002. PHA knew

Zachry was pressed to timely finish, and that PHA had to move quickly to avoid

delay. PX164, ¶9; PX172 at 3; 7:35-37, 44, 84-85; 25:50-53; 45:79.

To accommodate PHA’s belated addition, Zachry would have to modify its

methods to add a “frozen-cutoff wall” to ensure it could timely complete

Milestone-A to allow the crane-ship to dock and finish the remainder of the wharf

6

in the dry. 7:99-101; 9:138-39; 27:96; 38:51-53; PX8.0011(A20). On April 5,

2005, Zachry’s Project Manager Andy Anderson told CH2M-Hill’s Construction

Manager Andy Thiess and Design Manager Jeff Ely that Zachry’s extension

proposal was based on using a frozen-cutoff wall, which he sketched and explained

would encompass one B-row pier. PX8.0004-5, .0013(A20); 10:18-29; 21:128-30;

38:39, 46, 48-49, 61-62, 130-31. Thiess and Ely understood the frozen-cutoff wall

would also be 4.5 feet from two rows of piers, and promptly sketched and

described the wall to PHA officials, including Project Manager Jim McQueen and

Bayport Engineer Mark Vincent (who reported to Chief Engineer Steve DeWolf,

managed the project for him, and was charged with helping administer the Contract

correctly on PHA’s behalf). 7:32, 104-11; 21:104-08, 128-29; 24:120, 135-39;

38:62-63; 44:83; 45:41-46; 64:34-35; PX61.

PHA contends Thiess and Ely were not concerned about the design at the

April 5 meeting because they believed the frozen soil would impact only the single

B-row pier entirely encompassed by the frozen-cutoff wall. PHASupp:5. But Ely

and Vincent testified they were concerned because the 4.5-foot distance between

the frozen-cutoff wall and piers was half the nine-foot buffer Zachry said it would

maintain “whenever possible.”4 21:110-11, 138-39; 45:63; p.3. Furthermore,

4 PHA’s assertion that Thiess was unconcerned because he thought 4.5 feet (1½ pier diameters) was acceptable based on a “rule of thumb” was discredited: nothing documented the “rule,” and PHA’s geotechnical experts were unaware of it. 27:121-23; 38:68-69, 73-74.

7

Thiess, Ely, Vincent, and DeWolf knew the “freeze front” would migrate away

from the freeze-pipes and “go around” the piers 4.5 feet away (if not stopped).

7:52-53, 106-14; 10:26-27; 21:139; 25:38-39; 29:68; 37:117-18; 45:63;

PX138.0018. Ely told Vincent, Thiess, and McQueen that freezing would occur

very close to some piers, in his view potentially reducing their capacity. 22:96-97,

128-29; 23:5-8, 24.

PHA also asserts Anderson had considered a frozen-cutoff wall as an option

to help Zachry timely complete Milestone-A. PHASupp:4. However, PHA

understood the frozen-cutoff wall became “required if Zachry were going to do the

extension” and still meet the Milestone-A deadline. 7:99-101; see 9:138-39; 10:31,

112; 27:96; 28:31-32; 38:51-53; PX8.0011(A20). The reason was simple. With

the frozen-cutoff wall, Zachry could timely accommodate the crane-ship’s arrival

on one side of the cutoff-wall and still finish the remainder of the wharf, including

the extension, in the dry on the other. 10:35; 38:38; 7:100-01; 28:31-33; PX172 at

4-5. Without the frozen-cutoff wall, the addition of the sixth wharf section meant

Zachry would have to try to complete, excavate, and place revetment under the

entirety of the now-20% longer wharf by the Milestone-A deadline; at that time,

the main freeze-wall would be breached to dock the crane-ship, and Zachry would

have to finish the entire project in the wet. 9:135-36; 21:94; 28:33-34;

PX8.0011(A20).

8

IV. PHA conceals its unsubstantiated “concerns” about the frozen-cutoff wall to induce Zachry into agreeing to build the extension. On April 13, 2005, Zachry sent PHA a proposal to build the wharf extension

based on an “[u]ninterrupted work process” and the “[u]se of a freeze wall—cut off

wall, encompassing one (1) ‘B’ row piling.” PX9(A21); 10:111. These conditions

were unchanged by a May 18 proposal and July 11 supplemental proposal.

PX179(A22); PX219(A23).

PHA understood Zachry’s price was based on these conditions, and that the

frozen-cutoff wall in the proposals was the same one described to Thiess and Ely

on April 5. 22:22-25; 25:44-47; 38:96-97; 45:75-76. PHA also knew the frozen-

cutoff wall was Zachry’s only means and methods to timely complete the wharf.

22:125-26; 26:119-20; 38:112; 45:103-04; 46:40.

Even though PHA knew the frozen-cutoff wall was “required,” it never told

Zachry its concerns, 11:13; 22:96, 146, despite knowing quick resolution of such

concerns was critical to avoid delaying Zachry under the tight schedule.

PX46.0001; 7:43-44, 67-68; 20:53-56.

The Supreme Court recognized that PHA—afraid Zachry might decline to

build the extension—induced Zachry into entering Change Order 4 (“CO4”) to

build it by intentionally concealing PHA’s concerns about the frozen-cutoff wall:

As a practical matter, only Zachry could perform the additional work. . . . The Port had reservations about this [frozen-cutoff wall] plan. But the Port was also concerned that if it rejected Zachry’s plan, Zachry

9

might simply refuse to undertake the addition of a sixth section. So the Port did not raise its concern with Zachry.

449 S.W.3d at 102-03(A3).

The Supreme Court’s conclusion was amply supported. PHA knew only

Zachry could build the extension without undue additional cost and delay. See p.5.

But Zachry was already on a tight schedule. See pp.4, 5. Adding the sixth section

meant Zachry would have to do 20% more work, p.7, though CO4 would only

extend Milestone-A by 15 days, see p.4; PX12.0004 (A30).

However, PHA had not signed CO4. 8:36; 27:40. As a result, Zachry could

not begin working on the extension, exacerbating the already-tight schedule.

PX225 at 4-5; PX226 at 3-6; PX228; PX229; PX232 at 13; 10:52-54, 68, 73;

26:68; 18:84-87; 26:93-94, 102-09. And Zachry was not contractually bound to

build it. 27:40. PHA Project Manager McQueen blamed PHA “bureaucrats” for

the delay. PX215 at 7.

Aware of Zachry’s time-crunch and that Zachry was not yet bound, PHA

“management [wa]s afraid ZCC w[ould] back out of the extension agreement.”

PX280(A29); 27:40; 45:113. PHA therefore acted to keep Zachry on the hook by

inducing it into CO4.

First, although PHA knew throughout the summer of 2005 that Zachry

projected it would not timely complete Milestone-A (because Zachry was

including an extension of time it claimed under Contract §5.08 due to a global-

10

cement shortage), PHA decided to pay Zachry anyway and delay taking any formal

action against it—such as demanding a recovery schedule—until after CO4’s

execution. PX159; PX176; PX210; PX280(A29); PX319; 18:143-49; 22:109-11;

27:36-40; 39:17-18; see p.17.

Second, PHA allayed Zachry’s concerns about the $20,000/day Milestone-A

liquidated damages (“LDs”). PHA had denied Zachry’s request to extend

Milestone-A based on the global-cement shortage. PX159; PX175; PX176; 25:60-

61. Zachry thus sought assurances that PHA would not charge LDs if the crane-

ship could dock upon arrival. 25:66-67; PX177. In that case, PHA would not be

charged demurrage—the basis for Milestone-A’s $20,000/day LDs. 45:65-66; see

also PX935 at 1, PX936 at 4; DX1-1.0021(A17). Recognizing the ship was

delayed, PHA’s Vincent told McQueen that “[a]lthough we will not put it in

writing,” McQueen should tell Zachry PHA “will not charge penalties if no

expense or loss to PHA occurs….” PX176; 28:71. McQueen complied, telling

Anderson PHA would not charge LDs if the ship could dock upon arrival (because

PHA would not be charged demurrage). 10:41; see 28:74.

Although PHA contends it promised not to charge LDs only if PHA

sustained no harm whatsoever, McQueen confirmed Zachry’s understanding: he

testified PHA acted contrary to its promise in charging LDs even though the crane-

ship docked upon arrival. 28:74; see also PX205.0002. The Supreme Court

11

correctly concluded that “[i]n negotiating [CO4], PHA had promised not to impose

[LDs]...as long as the [crane-]ship…could dock when it arrived,” but

“[n]evertheless, after the ship successfully docked,…began withholding [LDs].”

449 S.W.3d at 103(A3).

Third, despite its “concerns” about the frozen-cutoff wall it knew was

“required” to allow Zachry to meet Milestone-A, PHA did not object to it before

CO4 was signed. 11:13, 106; 19:80-81; 22:76, 96, 119. PHA instead agreed in

CO4 that Zachry could use the frozen-cutoff wall. See pp.12-13, 33-34.

V. PHA waits to reject the frozen-cutoff wall until after Zachry is bound by CO4, which plainly incorporates the frozen-cutoff wall. On September 9, 2005, soil-freeze expert Mageau sent Zachry the frozen-

cutoff-wall design. PX10(A25). It was identical in all material respects to the wall

discussed at the April 5 meeting and incorporated into the proposals. PX10.0001-

.0002, .0005(A25); 8:42-43, 53; 10:94-98, 111; 22:73-77; 29:123-24.

Anderson directed the design be sent to PHA “for review. Not approval—

but review.” PX267; 10:92-93. On September 12, Zachry labeled the design

“Correspondence” (not “Submittal”) and uploaded it to PHA, noting PHA could

“see what will be happening and gather questions.” PX897; 8:39; 11:33-34;

38:152, 157; 45:143. PHA knew it was not provided as a Submittal, and that

Zachry was not asking for approval, just comments. 38:152-53, 157; 45:143-44.

Like the main freeze-wall, PHA could review it for a Texas PE’s approval, but

12

could not approve, reject, or order Zachry to revise and resubmit it. 9:49-50;

11:28; 22:70-72, 93-94; 23:91-92; DX5.002; pp.5, 28-29. CH2M-Hill’s Thiess

told PHA’s McQueen internally, “[t]his isn’t going to be an approval-type thing,”

PX274 at 3(A26); 39:37-38, but recognized PHA “need[ed] due diligence to

identify and communicate any technical issues,” PX11(A27); 22:93-94.

Based on the September 9 design, PHA’s Vincent and McQueen understood

the frozen-cutoff wall “was freezing up and near the shafts.” 46:5; see 26:150-52.

CH2M-Hill’s Ely noted they needed to “verify the freeze wall won’t reduce the

capacity of the…piers.” PX11(A27). Nevertheless, PHA management on

September 14 formally recommended PHA execute CO4. PX3(A28); 26:161-63;

39:44-49; 45:147-48.

PHA finally executed CO4 on September 27. PX12.0002(A30). As the

Supreme Court recognized, CO4 gave Zachry the right to use the frozen-cutoff

wall embodied in the September 9 design:

To complete the two sections of the wharf needed by February 2006 and to continue to work ‘in the dry,’ Zachry proposed to build another freeze-wall—a cutoff wall—through the middle of the project....Change Order 4, using Zachry’s approach to add a sixth section of the wharf...was finalized September 27, 2005.

449 S.W.3d at 101, n.3(A3).

CO4 provided Zachry would construct the extension “in accordance with the

attached Scope, Time and Price Modifications,” which incorporated Zachry’s

13

proposals conditioned on an “[u]ninterrupted work process” and the “[u]se of a

freeze wall—cutoff wall, encompassing one (1) ‘B’ row piling.” See pp.8, 33-34;

PX12.0001, .0004(A30); 26:112-14. PHA had reviewed the September 9 design,

which embodied the April 5 design described in the proposals, for two weeks

before executing CO4. 10:111-16, 118, 8:50-51; 22:92, 119-20; 27:37; 45:147-48;

p.34.

Although PHA’s Vincent and McQueen had known for two weeks (and

really since April 5, p.6-7) that the frozen-cutoff wall design involved freezing

near piers, Ely—on the same day PHA signed CO4—reiterated to McQueen that

frozen soils would be kept only one foot from piers, allegedly putting 23 piers “at

risk for capacity reduction.” PX286. He did so despite freeze-soil expert Mageau’s

tests proving “one freeze-thaw cycle does not appear to reduce the shear strength in

the soil.” See p.3.

On September 28, Mageau provided PHA more analyses proving that even if

soil were frozen all the way around the piers, there would be virtually no increase

in settlement. PX14.0001(A31); 22:150-51; 27:66; 29:76-77; 39:66-69. PHA

knew there was no reason for concern. 39:66-69; PX504(A36). But no one

associated with PHA would take responsibility for allowing Zachry to move

forward:

* McQueen told CH2M-Hill “I have a problem and we need an answer ASAP,” and that Ely and Thiess had “to take the lead in resolving this

14

problem w/a solution.” PX301.

* CH2M-Hill would not opine on the design, because it did not want to incur liability for Zachry’s methods. 23:89; 30:84-85; 46:43.

* Wharf-designer DMJM refused to review the design because it was Zachry’s means and methods. 30:63-64; 46:41-42.

* PHA had not yet hired its geotechnical engineer, GeoTest, to review the design, and knew GeoTest would never give a definitive answer anyway. PX1(A32); 23:23, 75-76.

Instead, Ely surveyed CH2M-Hill’s geotechnical experts about his “concern,”

explaining he wanted to “give our client some guidance without incurring

additional liability if possible.” PX15; 22:157-61; 23:25-28. Most responders—

including some with soil-freeze experience—concluded the design presented no

concern. PX290; PX292; PX293; 23:31-47; 46:19-24. Nevertheless, Ely

disregarded these geotechnical experts, and sent PHA a memo expressing

unsubstantiated “concerns” about this geotechnical issue “from a structural

engineering, not geotechnical perspective.” PX301; 23:56-62; see PX11(A27).

PHA conceded at trial it had not determined—or even tried to determine—

that the frozen-cutoff wall was likely to adversely affect piers, 8:79-80, 89-90;

22:84; 23:97, 101-02; 24:112-14; 27:32, 80-84; 46:30-36, 58-59, although Chief

Engineer DeWolf expected his engineers to get GeoTest involved, 6:7, 10; 7:110-

14. PHA’s only information consisted of soil-freeze expert Mageau’s reports

proving freezing would have no adverse effect. 24:112-13; 27:66; 39:96; 46:27,

15

30-31, 57-59; PX14(A31); PX138.0014.

VI. PHA issues its R&R Order, which everyone understands rejected the frozen-cutoff wall and which Zachry makes clear to PHA constitutes a breach. Despite knowing the tight schedule and imminent Milestone-A deadline,

pp.4, 5, 9, on October 11, 2005, PHA switched the September 9 design’s label

from “Correspondence” to “Submittal” and issued the R&R Order. PX266(A33);

11:31, 33-34; 27:82, 88-89. The order expressed concern about freezing’s effect

“on the friction resistance of the piles,” and stated “preliminary indications are

that the design may have an indeterminate affect [sic] on a significant number of

nearby shafts which may present unacceptable risk to the Port”—a concern

Vincent and McQueen admitted was “speculation.” PX266(A33); 27:84; 46:49-50.

Everyone knew the R&R Order rejected the frozen-cutoff wall. See, e.g.,

39:133-36; PX1(A32); PX2(A35); PX358.0001. PHA conceded this at trial. 4:94;

27:74; 39:135. The frozen-cutoff wall was undisputedly Zachry’s means and

methods, and Zachry had the right to use it under Contract §5.10 and CO4. See

pp.4-5, 12-13, 26-34. Yet, as the Supreme Court recognized, “[t]he practical effect

of the Port’s [R&R] order was to refuse to allow the construction of the cutoff

wall.” 449 S.W.3d at 103(A3); see 8:69-70; 21:58-59; 45:34-35; DX1-1.0219-20,

§5.22(A13) (subject of revise-and-resubmit order “may not be used for

performance of the Work”). Although PHA now claims Zachry could have offered

16

a means of mitigating the frozen-cutoff wall’s “risk,” PHA demanded a nonfrozen

alternative. PX4.0003 (“The cut-off wall…cannot be constructed using freeze-wall

technology.”); PX314 at 3-4(A34); 11:56; 23:101; 27:87-88; 68:114.

Although PHA mischaracterizes this as a “secret breach,” the Supreme Court

correctly concluded Zachry told PHA it was a breach: “Zachry protested that,

under [§]5.10…, the Port had no right to determine the method and manner of the

work, but the Port would not budge.” 449 S.W.3d at 103(A3). At the October 11

meeting where the R&R Order was delivered, Anderson immediately objected that

it was contrary to the Contract: he told PHA the design was “not a submittal that

requires approval,” but “is for information purposes only,” and Zachry’s risk to

accept. PX314 at 4, 6-7(A34); 11:33-34, 39; 18:127-28; 23:102-04; 27:88-89.

McQueen responded, “I understand.” PX314 at 7(A34). McQueen expressed

concern PHA could be liable and admitted he knew Anderson was saying PHA

violated the Contract. PX1(A32); PX287; 23:82-85; 27:48-49, 89-90, 93-94; see

also 44:82-83 (Vincent). Later on October 11, Anderson told Thiess the R&R

Order was a breach. 11:40-41. A month later, Thiess acknowledged Zachry had

claimed PHA’s “rejection of the cutoff-wall design is a breach of the change order

contract.” PX2(A35); 39:130; 68:122.

VII. PHA’s rejection of the frozen-cutoff wall forces Zachry to complete construction in the wet. Contrary to PHA’s claim that Zachry voluntarily switched to working in the

17

wet, the evidence establishes PHA forced Zachry to do so. First, PHA barred

Zachry from using its frozen-cutoff wall—the means and methods PHA knew was

“required” to timely complete the wharf in the dry, given the additional extension

work. See pp.7, 8, 15. Then, three days later, despite having known for months

that Zachry projected a delayed Milestone-A completion, pp.9-10, 18. Chief

Engineer DeWolf for the first time sent Zachry a letter demanding a recovery

schedule (showing Zachry would finish by the Contract deadlines, which were

conditioned on the frozen-cutoff wall) and threatening LDs. PX319; 19:29-31.

Higher-ranking PHA officials repeated this demand in October and November.

See, e.g., 40:32-33, 38-40; 46:82-83; 66:86-87; DX85; DX205.003; PX373.0003;

PX925. See also 35:6; 36:5-7.

By demanding a recovery schedule after barring Zachry’s frozen-cutoff wall,

PHA necessarily forced Zachry to begin working in the wet far earlier than it

otherwise would have. 18:115-17, 123-26; 28:31-33; see 9:137-38; 11:82-96;

19:33-50; DX404. Without the frozen-cutoff wall, neither Milestone-A nor the

remainder of the wharf could be constructed in the dry. 9:137-38; 11:85-86; p.7,

20. There was no viable alternate cutoff wall. 46:83; p.20. This demand

constituted a direction to perform additional work, because—as PHA knew,

40:131; 46:133-34; PX373.0003; PX461—building the wharf in the wet would

take far more time and money than building it in the dry, id.; 10:62; 29:40-42;

18

33:6; 47:60-61; 52:31, 102; 61:110.

Zachry refuted PHA’s assertion that Zachry voluntarily switched to working

in the wet because it could not meet the schedule using the freeze-walls. In late

September/early October, Zachry was still projecting a March 22 Milestone-A

completion. 18:116-18; DX404. But PHA knew—based on reports from PHA’s

on-site inspectors and Zachry’s scheduler—that Zachry could finish Milestone-A

by the February 15 deadline and that schedules showing a March 22 completion

were a “paperwork trail” preserving Zachry’s claim for extension of time based on

the global-cement shortage.5 PX251; PX252; PX283; 26:100-02; 45:103-05;

65:92-93, 99-100, 105; pp.9-10.

Three days after PHA’s rejection, Mageau projected Zachry could finish

Milestone-A by the February 15 deadline and certainly by March 22—before the

crane-ship’s arrival. PX320; 30:115-16; 32:105-06. And Larry Applegate, the

freeze-wall subcontractor’s president, stated on November 11, 2005 that freeze-

down Phase 1 could begin immediately with the remainder starting by

Thanksgiving. PX360.0002; 33:47, 50-54. Mageau and Anderson agreed, despite

freeze-pipe-related and other challenges Zachry faced. 18:105-11; 30:115-18;

32:100-01; PX320. This would have allowed Zachry to finish Milestone-A before 5 Anderson’s comment post-Hurricane Rita that there wasn’t “a snowball’s chance in hell of having that wharf open by March...’cause the math don’t work,’” DX1157A, referred to Zachry’s 9-day extension request for hurricane-caused delays. 19:113-15. Adding 9 working days to the projected March 22 date pushed completion into April. Id.

19

the crane-ship arrived. 19:43-45.

PHA points to schedules Zachry created on October 31 purportedly showing

Zachry finishing much later than projected in its October 3 schedule. But the

October 31 schedules were unfinished, non-concurrent schedules: they listed tasks

end-to-end rather than accurately reflecting concurrent performance, thereby

appearing artificially lengthy. 40:45-47, 55. See PX779.0005; PX777.0005;

PX780.0005; 18:119-23; 19:50-55; 28:11-13, 16.

More importantly, these schedules were brain-storming exercises created

after PHA’s October 11 rejection of the frozen-cutoff wall that PHA knew was

“required” to allow Zachry to meet the Milestone-A deadline. See pp.7, 8, 11.

Without the frozen-cutoff wall, it was difficult for Zachry to create schedules

without knowing its means and methods. 19:38-43; 40:69-79; 46:67. Zachry

created 38 draft schedules in an attempt to determine which construction method to

use. 11:83-87; 40:70-71; PX373. Unlike the pre-October 11 schedules, none used

a frozen-cutoff wall under the wharf—thus confirming its rejection. 18:124-25;

35:101; 46:76-82; see 28:22, 31-33.

PHA contends the schedules showed Zachry would finish soonest by

removing the main freeze-wall and working in the wet. PHASupp:12. But these

schedules were the result of PHA’s rejection of the frozen-cutoff wall—combined

with the lack of a viable alternate-cutoff wall. Zachry’s alternate-cutoff-wall

20

schedule projected a later finish date because the alternative method of building the

cutoff wall was still “unidentified,” and Zachry had to project extra time to design

it, procure materials, and build it. PX779; 40:45, 48; 46:91. Zachry quickly

determined an alternate cutoff wall was not viable, because there were serious

doubts it could be designed and no time to implement it, given the imminent

Milestone-A deadline. 19:38-50; 28:22; 46:78-79, 90-92. Indeed, when Mageau

delivered an alternate-cutoff-wall design on November 16, it was unworkable,

unsafe, and could have damaged piers. 11:50, 52-58; 19:45-50; 42:64-67, 77-79,

91-98; PX366; PX931 at 19-21; see 58:107-08.

PHA’s rejection of the frozen-cutoff wall made meeting the Contract

deadlines “an impossible task,” in light of the wharf extension. 19:57-60. Without

the frozen-cutoff wall, Zachry would now have to complete the entire main freeze-

wall, freeze it, and excavate the entire 2,000 feet of the now-extended wharf by the

Milestone-A deadline, 28:33-34—all of which would take far longer than the prior

plan of completing only the Milestone-A area. 11:45-49; 32:131-33. For this

reason, someone at Zachry noted on November 3 that—in the absence of the

frozen-cutoff wall—the main “freezewall” was “killing [the] baseline schedule.”

DX82.006; 19:56-58.

Given PHA’s rejection and recovery-schedule demands, Zachry’s only hope

of meeting the Milestone-A deadline was to use the unfrozen berm as a seawall as

21

long as possible, completing Milestone-A and excavating under the wharf as

quickly as possible, then breaching the berm for the crane-ship’s arrival and

finishing the remainder in the wet. 11:87-89. The Supreme Court correctly

concluded that, following the R&R Order, “Zachry’s only option was to finish the

western-most sections in time for the ship from China to dock, then remove the

wall altogether and continue to work ‘in the wet,’ which would delay completion

of the project and increase its cost.” 449 S.W.3d at 103(A3).

Having now deprived Zachry of its freeze-wall methods, PHA grew

concerned about its liability. 24:70-73. It met with lawyers, and on November 18

told Zachry, “[i]n accordance with...[§]5.10,” PHA had no right to interfere with

Zachry’s methods. PX18; 46:123-24. But PHA did not withdraw its rejection.

46:126. Instead, PHA insisted PHA’s lawyers choose from among the schedule

options, and they chose an in-the-wet schedule with a May 28 Milestone-A

completion date. PX367.002; PX373.0002, PX380; 19:66-71; 40:120-22, 128.

On January 16, 2006, Zachry sent PHA a letter confirming its change to

working in the wet was the “direct result” of PHA’s rejection of the frozen-cutoff

wall, recovery-schedule demands, and LD threats. PX20.0003.

VIII. Working in the wet causes Zachry substantial damages for which it sues. Zachry worked in the dry behind the berm as long as possible. 47:47-58.

After it was breached, Zachry completed the wharf in the wet under “nightmare”

22

conditions, excavating and placing revetment underwater beneath the deck with

almost zero visibility. 29:40-42; 40:131; 47:79.

Zachry sufficiently completed Milestone-A to allow the crane-ship to dock

upon arrival May 15, 2006. 11:117; 40:131-33; 47:68-69; PX893.0076. Yet PHA

back-charged Zachry $2.36 million in LDs from the Milestone-A deadline forward,

although PHA incurred no demurrage. 40:131-32; 45:72-73. McQueen admitted

this was contrary to his promise. 28:73-74.

In October 2008, Zachry substantially completed the project. 47:80-81;

PX578. Despite heavy losses, Zachry sought only damages caused by PHA’s

breach—the increased cost of construction as a result of PHA’s delays and forcing

Zachry to work in the wet earlier than it otherwise would have. 47:86-87.

After a three-month trial, the jury found PHA failed to comply with CO4

and §5.10, causing Zachry $18,602,697 in damages. CR59:17390-93(A4). The

judgment awarded those damages, plus $2.36 million PHA withheld as LDs, minus

a $970,000 offset for wharf fenders, for a recovery of $19,992,697, plus interest.

CR62:18166(A1).

This Court, based on its holdings that the no-damages-for-delay clause

precludes Zachry’s recovery and that PHA’s release defense barred Zachry’s

recovery of the LDs, reversed and rendered judgment that Zachry take nothing and

PHA recover $10,500,000 in attorney’s fees, plus contingent appellate fees. 377

23

S.W.3d at 865(A2).

The Supreme Court held governmental immunity did not bar Zachry’s

claims, reversed this Court’s judgment regarding the no-damages-for-delay clause

and LDs, and remanded. 449 S.W.3d at 119-20(A3).

24

SUMMARY OF ARGUMENT

The Supreme Court rejected PHA’s main appellate points—immunity, no-

damages-for-delay, and release. PHA is left with a laundry list of second-tier

arguments that largely invite this Court to revisit evidentiary disputes resolved by

the jury, issues committed to the trial court’s discretion, and issues the Supreme

Court previously decided against PHA. PHA’s invitation should be declined.

In Questions 1 and 2, the jury properly rejected PHA’s contrived reading of

CO4 and §5.10. Unlike Zachry, PHA offers no interpretation that harmonizes all

Contract provisions and satisfies PHA’s business purpose—to avoid liability from

control of Zachry’s methods. PHA’s challenge to the damages and causation

findings in Question 3 likewise ignores the substantial evidence supporting them.

Nor do Contract §§5.41/5.42 bar Zachry’s claims. These “changes” clauses

plainly allow PHA to change the scope of the Work during Contract performance.

They do not govern Zachry’s rights in the event of a PHA breach. If they did, they

would be inapplicable under common-law and statutory rules.

PHA’s remaining arguments are also without merit. The trial court did not

abuse its discretion in rejecting PHA’s eleventh-hour attempts to inject $8.6

million of claimed “harms” into the case. Furthermore, as the Supreme Court held,

the trial court properly instructed the jury on the no-damages-for-delay exceptions,

including recklessness. The trial court did not abuse its discretion in finding

25

Zachry pleaded apparent authority, and its instruction was proper. And PHA is not

entitled to attorneys’ fees so long as the judgment awards Zachry damages.

Finally, PHA’s attempt to deny Zachry pass-through recovery for the work of its

subcontractor—a Zachry entity created during corporate restructuring—

contravenes Interstate Contracting v. City of Dallas, 135 S.W.3d 605, 610 (Tex.

2004).

26

ARGUMENT

I. Ample evidence supports the jury’s breach-of-contract findings.

PHA contends the Contract and CO4 unambiguously authorized PHA to

issue the R&R Order barring Zachry’s freeze-wall means and methods. But PHA

fails to “consider the entire writing and…harmonize and give effect to all the

provisions….” Frost Nat’l Bank v. L&F Distrib’rs, 165 S.W.3d 310, 312 (Tex.

2005). Nor does PHA “construe [the] contract[] from a utilitarian standpoint

bearing in mind the particular business activity sought to be served.” Id. PHA also

ignores that specific provisions control over general. See McCreary v. Bay Area

Bank & Trust, 68 S.W.3d 727, 731-32 (Tex.App.—Houston [14th Dist.] 2001, pet.

dism’d).

Applying these principles, there is only one reasonable interpretation: PHA

had no right to issue the R&R Order. At a minimum, Zachry’s reading is

reasonable, and ample evidence supported the jury findings in Questions 1 and 2.

A. Section 5.10 prohibited PHA’s R&R Order, and no other Contract provision authorized it.

1. Section 5.10 forbids PHA control of Zachry’s means and methods.

Section 5.10 plainly barred PHA from controlling Zachry’s means and

methods, which undisputedly included the frozen-cutoff wall. See p.4. It stated,

“[PHA] shall not have the right to control the manner in which or prescribe the

27

method by which the Contractor performs the Work,” and that Zachry was “an

independent Contractor…solely responsible for the supervision and performance of

the Work…in such manner, using such methods as Contractor shall choose.”

DX1-1.0214(A13).

This prohibition on PHA control was not “subject to” the “proviso” at the

end of §5.10, PHASupp:1: it merely clarified that Zachry’s right to choose its

methods did not eliminate its obligation to comply with the Contract. DX1-1.0214,

§5.10(A13) (“…provided, however…the order, time, manner and methods of

prosecution shall be…in accordance with the Contract Documents”). When the

R&R Order was issued, Zachry was in compliance with the Contract; PHA does

not argue otherwise.

As discussed below, some Contract provisions allowed PHA to receive

means-and-methods-related submittals. However, none authorized PHA to

exercise control over Zachry’s methods by barring Zachry from using them and

ordering Zachry to revise them. Arguing these clauses granted PHA such control

fails to harmonize all Contract provisions and renders §5.10’s prohibition on PHA

control meaningless. It also vitiates PHA’s business purpose: “insulating [PHA]

from liability to which it would be exposed were it exercising control over

Zachry’s work.” 449 S.W.3d at 102 & n.4(A3); see pp.4-5. Finally, PHA’s

28

argument improperly gives controlling weight to general provisions relating to

submittals, like §5.22, rather than specific provisions, like §5.10.

2. Section 4.07 forbids PHA control over Zachry’s health-and-

safety plans.

Contract §4.07 required Zachry to submit a health-and-safety plan to PHA,

but made clear PHA could not control it:

Notwithstanding the Chief Engineer’s review of the health and safety plan, the Contractor, and not the Port Authority, shall be responsible for and have control over ensuring the safety of its personnel and its Subcontractors…

DX1-1.0204(A13).

Zachry agreed to submit the main freeze-wall design as a shoring-safety-

plan addendum to its previously filed health-and-safety plan, “in accord[] with

Technical Specification [‘T.S.’]02161(1.3)” and “conforming to OSHA standards,

with a statement signed and sealed by a registered Professional Engineer licensed

in…Texas.” PX86; see DX1-1.0325, §1.3(A14); PX93.0007; 21:78; 6:60.

T.S.02161 required the shoring-safety plan to include details about the

Contractor’s means and methods but did not authorize PHA to control them. DX1-

1.0325, §1.3(A14). Nor could it: T.S.02161 was expressly “[s]ubject to the

General and Special Conditions,” which included §5.10 and §4.07. DX1-1.0324,

§1.1(A14). Instead of PHA approval, T.S.02161 required Zachry to obtain a Texas

PE’s approval. Id. The purpose of this review was to ensure the shoring plan

29

satisfied OSHA safety rules, so the wall would not harm workers; as PHA

witnesses testified, it did not allow PHA to approve or reject the wall based on any

purported effect on the wharf. 6:62-67; 7:62; 20:111; 27:19-21; 37:106-07. The

Texas PE’s approval ensured PHA would not be liable for Zachry’s activities.

44:90.

Consistent with §4.07 and §5.10, PHA did not “approve” the original freeze-

wall design, but rather “accepted [it] for records” based on the Texas PE’s

certification. 37:115-16, 120-21; 37:114-16; 38:5-6, 156-57; 44:100-01, 109-11;

45:32; PX88(A19). PHA’s witnesses testified PHA did not approve or reject the

original freeze-wall or safety submittals to avoid claims it controlled Zachry’s

methods and any attendant liability. 37:115; 44:95-97. No one contemplated PHA

could approve or order Zachry to revise its main freeze-wall plan: Zachry built it

and installed freeze-pipes before giving PHA the design. 44:110-11.

3. None of PHA’s other cited provisions authorize the R&R Order.

Section 5.22. Although §5.22 allowed PHA to “review” Submittals “to

determine whether Contractor is complying with…the Contract Documents,” it did

not authorize PHA to control Zachry’s means and methods—contrary to §5.10—by

rejecting them.

Consistent with §5.10 and §4.07, §5.22 specifically forbade PHA to approve

Zachry’s safety plan or means and methods: “The Port Authority’s…review and

30

acceptance of the Contractor’s Submittals shall not constitute approval of safety

precautions or any construction means, methods….” DX1-1.0220(A13); 6:70-71.

Thus, §5.22 insulated PHA from liability for Zachry’s methods. 6:57, 71.

In contrast, §5.22 did not disclaim PHA’s right to approve Submittals

relating to matters PHA was authorized to control under the Contract: Submittals

relating to the “Work.” Section 5.22 required Zachry to provide submittals to

PHA’s Design Consultant, DMJM, “showing all materials and details of Work to

be incorporated into the Project.” DX1-1.0218(A13). “Work” was defined as “the

construction” and “services” “required by the Contract” or “pursuant to the

Contract.” DX1-1.0190, §1.42. Thus, the wharf and any contractually specified

means and methods—for example, the Technical Specification requiring a

particular method for vibrating concrete pours—would be part of the “Work” and

subject to PHA approval. 6:47, 53-55; 9:36-37; 21:33; DX1-10430. This ensured

the permanent Work (wharf) was built according to the Contract specifications.

6:58-59; 8:11.

In contrast, Zachry’s chosen means and methods—the freeze-walls—were

not required by the Contract, 20:96; 37:66, 99; 44:78, would not be part of the

Work, 21:33, 63; 27:11, and would not be required Submittals under this clause,

6:54-57, 59, 74-75; 21:71-73; 37:99. In August 2004, Thiess confirmed this:

“[r]egarding the freeze wall, we have no requirement for a submittal as it was not

31

anticipated by the designers.” PX84(A18). PHA’s designer refused to approve any

freeze-wall, because it was Zachry’s means and methods. 20:110-11; 44:95;

PX93.0007. Submittals relating to Zachry’s safety plan and methods were

controlled by §5.22’s prohibition on PHA approval.

T.S.01500. Although T.S.01500 required Zachry to protect the Work, it did

not authorize the R&R Order. DX1-1.0271, §1.1A(A15); 27:29-30. T.S.01500

was “[s]ubject to the General and Special Conditions,” DX1-1.0271, §1.1A(A15);

see DX1-1.0191, §2.02(a)(A13), including §5.10’s bar on PHA control, and §4.07

and §5.22’s prohibition of PHA approval of Zachry’s safety plans and methods.

Consistent with PHA’s goal of avoiding liability, T.S.01500 required Zachry to fix

any damage “done by, or on account of...the Contractor.” DX1-1.0278,

§1.11A.4(A15). PHA’s argument grants PHA control, destroying this protection.

Section 1.39. Nothing in §1.39 authorized PHA to order Zachry to revise

Zachry’s means and methods. It defined “Submittals” as “information provided

by [Zachry] for approval of proposed Equipment, Materials, means or methods.”

DX1-1.0189(A13). Critically, §5.22 prohibited PHA from approving Zachry’s

means and methods (as opposed to contractually specified methods). See pp.29-

31. Thus, any submission of Zachry’s methods was not “information provided by

[Zachry] for approval.” And reading §1.39’s general “Submittal” definition to

authorize the R&R Order improperly allows §1.39 to control over §5.10 and

32

§4.07’s specific prohibitions on PHA control.

4. PHA is not remediless.

PHA contends Zachry’s argument deprives PHA of any recourse if PHA

believed Zachry’s means and methods “could cause the Wharf to collapse.”

PHASupp:25. Even if such a belief could authorize the R&R Order, ample

evidence established PHA did not actually or reasonably believe the frozen-cutoff

wall could cause wharf collapse. See pp.13-15.

Furthermore, the Contract contains numerous provisions allocating to

Zachry the risk of damage from Zachry’s methods and providing PHA a remedy.

See, e.g., DX1-1.0198, .0200, .0223, .0229, .0234, §§ 3.06, 3.08, 5.36, 5.53,

6.14(A13); DX1-1.0278, §1.11A.4(A15); 9:33-35; 27:13-18, 23-25. And if PHA

were truly concerned about wharf collapse, it could terminate the Contract without

cause. DX1-1.0227, §5.47(A13). The one thing the Contract did not allow PHA

to do was control Zachry’s means and methods by issuing the R&R Order. PHA

drafted the Contract, pp.3-4, and the Court should not rewrite it to grant PHA

rights omitted from it and contrary to PHA’s business purpose.

5. The drilled-shaft submittal is consistent with Zachry’s reading.

PHA suggests Zachry’s drilled-shaft submittal shows PHA’s right to issue

the R&R Order. PHASupp:2. But it related only to piers—which were part of the

“Work,” which PHA had the right to approve—not Zachry’s freeze-wall methods,

33

which PHA had no right to approve. See PX6; PX69; 7:45; pp.26-32. PHA

recognized this, warning “any ice…encountered during drilled-shaft construction

will be cause for rejecting the affected work”—not Zachry’s freeze-wall methods.

DX133.002

B. PHA’s R&R Order breached CO4.

PHA argues CO4 did not “delete PHA’s §5.22 right to require Zachry to

revise and resubmit Zachry’s frozen-COW design.” PHASupp:25. But §5.22

afforded no such right. See pp.29-31.

Even if PHA had such a right, ample evidence supported the jury’s finding

that PHA agreed in CO4 that Zachry could use the frozen-cutoff wall, and CO4

controls. DX1-1.0191, §2.02(a)(A13).

CO4 incorporated “Proposer’s Specifications and Proposal dated April 13,

2005, as amended by Proposals for 330 feet Wharf Extension [the May 18

proposal, 26:110-12] and as further amended by Proposer’s Supplemental Proposal

dated July 11, 2005….” PX12.0001, .0004(A30). Both the April and May

proposals were conditioned on an “[u]ninterrupted work schedule” and the “freeze

wall-cutoff wall, encompassing one (1) ‘B’ row piling”—the same one described

to PHA representatives on April 5 and memorialized in the September 9 design.

PX9(A21); PX179(A22); pp.8, 11. 6 The July 11 proposal did not delete these

6 PHA’s claim it rejected the April 13 proposal is immaterial. The May 18 proposal—which

34

conditions: it was merely a “[s]upplemental proposal” that offered “additions and

clarifications.” PX219(A23); 8:60; 10:116. PHA signed CO4 after reviewing the

September 9 design—which embodied the April 5 design described in the

proposals—for two weeks. 10:111-16, 118, 8:50-51; 22:92, 119-20; 27:37; 45:148;

p.13. 7 Thus, CO4 included PHA’s agreement that Zachry could use the frozen-

cutoff wall. See pp.12-13.

PHA concedes CO4 is at least ambiguous as to Zachry’s right to use the

frozen-cutoff wall, but argues there is “no intent evidence.” PHASupp:27. CO4’s

language incorporating the April and May proposals refutes this. Furthermore,

Zachry’s Anderson testified CO4 “included language with the frozen-cutoff wall”

and “expressly said that we had the right to use it as a result of this change order.”

15:61. PHA cites nothing for its argument CO4 did not bind the parties if it

authorized, but did not require, Zachry to use the frozen-cutoff wall.

Thus, the evidence supports the jury’s finding that CO4 authorized Zachry to

use the frozen-cutoff wall. PHA does not challenge the sufficiency of the evidence

of breach under this interpretation to support Question 1, because it cannot. See

pp.15-16.

PHA does not claim was rejected—was also conditioned on the frozen-cutoff wall. PX179(A22). Furthermore, PHA cites nothing holding a previously rejected proposal cannot be incorporated into an agreement. 7 PHA’s irrelevant claim that Zachry changed its theory on CO4 is disproved by PHA’s citations. CR31:8541; 1(9/11/09):27, 80.

35

C. Question 1 was proper.

The instruction in Question 1 that the jury was “not being asked to decide

whether PHA failed to comply with §5.10” was necessary to obtain separate

findings on whether CO4 gave Zachry the right to use the frozen-cutoff wall

(Question 1) and whether §5.10 barred PHA from issuing the R&R Order

(Question 2). CR59:17390(A4). The instruction was within the court’s broad

discretion. Kiefer v. Continental Air., 10 S.W.3d 34, 37 (Tex.App.—Houston [14th

Dist.] 1999, pet. denied).

Any error was harmless. The jury found PHA breached §5.10 in Question 2;

thus, deleting the instruction from Question 1 would not have changed anything.

See id. at 38; Shupe v. Lingafelter, 192 S.W.3d 577, 579-80 (Tex. 2006).8

II. The jury's verdict on causation and damages is supported by the evidence. Given the evidence that PHA’s rejection of the frozen-cutoff wall, demands

for a recovery schedule, and threats of LDs caused Zachry to switch to working in

the wet, pp.16-21, the remaining issue was the quantification of the effect of the

switch (damages). 51:152-54; 52:4-10. Zachry’s damages expert, Gary Draper,

testified about that quantification; he did not also need to opine on the cause of the

switch. Id.; p.40.

8 Question 1 should never have been submitted: CO4 unambiguously authorizes Zachry to use the frozen-cutoff wall, pp.12-13, 33-34, and PHA does not dispute breach under this reading, p.34. Zachry was entitled to a directed verdict. CR59:17299-313.

36

Draper (a) identified the construction activities the switch impacted; (b) as to

each impacted activity, calculated the cost Zachry would have incurred absent

PHA’s breach working in the dry as long as possible; (c) compared those costs to

the costs Zachry reasonably incurred as a result of switching to the wet earlier than

it would have absent PHA’s breach; and (d) excluded all other costs. 52:4-10, 16,

26, 72-74, 103-111; 117:172, 261. Draper calculated the costs of the switch (after

excluding other costs) to be approximately $27 million. 52:7-10, 110-11. After

hearing the evidence, the jury awarded Zachry $18,602,697. CR59:17393(A4).

A. Draper’s assumptions on damages were supported by the evidence and did not vary materially from undisputed facts.

PHA incorrectly asserts the assumptions underlying Draper’s model failed to

comply with Burroughs Wellcome v. Crye, which holds that experts may not

“assume[] facts that vary materially from the actual, undisputed facts.” 907

S.W.2d 497, 499 (Tex. 1995).

PHA ignores the substantial evidence supporting Draper’s model, and

instead asserts Draper’s dry schedule “varies drastically” from “dozens of

schedules Zachry prepared around the time of the” Port’s rejection. PHASupp:29.

But Draper scheduled a frozen-cutoff-wall methodology. 52:8. In contrast, the

schedules PHA cites were not based on a frozen-cutoff wall, because they were

created after the rejection. See PHASupp:29; p.19-20. Thus, these schedules did

not even attempt to project what Draper projected—a completion schedule using a

37

frozen-cutoff wall. Moreover, because they were drafts, they did not reflect

concurrent performance of tasks to accurately project completion dates. 11:49-50,

83-86; 18:124-25, 151-57; 19:32-60; p.19.

PHA’s other challenges to Draper’s assumptions—regarding freeze-pipe

removal and sheet-pile installation—ignore evidence supporting Draper’s

assumptions and do not show his assumptions vary materially from undisputed

evidence.

1. Draper’s treatment of freeze-pipe removal was supported by the evidence.

PHA incorrectly asserts the “undisputed” evidence showed freeze-pipe

removal would occur prior to berm removal and in a manner that would add a

material amount of time to Draper’s overall dry schedule.

First, Draper’s dry model—consistent with the evidence—provided for

freeze-pipe removal to occur concurrently with berm removal. 53:31-32; PX320;

30:106-08, 116-17.

• Zachry’s dry approach was to remove the berm and freeze-pipes

simultaneously and using the same equipment. 53:31-32; 10:61;

DX404.004.

• PHA’s own freeze-wall expert at trial, Mageau, concluded at the time

of the R&R Order that Zachry could remove the freeze-pipes and

perform the remainder of the work by mid-February to mid-March

38

2006 so the crane-ship could timely dock—even though he was aware

of freeze-pipe issues and other challenges Zachry faced. PX320;

30:106-08, 116-17; pp.18-19.

• Draper’s schedule was consistent with the contemporaneous frozen-

cutoff-wall project schedule created by Zachry shortly before the

rejection. DX404; 18:115-18, 124.

Second, even if freeze-pipe removal would occur separately from berm

removal, it would account for no more than one day of the critical path of the

schedule: the day after pipe-removal started, Zachry would begin the more time-

consuming critical-path activity of berm removal where the pipes had been

removed. After the first day, pipe and berm removal would proceed

simultaneously. 53:29-30. Draper included sufficient “float” to accommodate this.

Id.; 54:91-93.

PHA incorrectly characterizes Draper’s testimony as “assum[ing] a thousand

freeze-pipes could be removed in one day.” PHASupp:31 (emphasis original).

PHA’s suggestion that Draper should have scheduled more than one day to remove

pipes incorrectly assumes that pipe and berm removal could not occur

concurrently. See, e.g., 53:31-32; 10:61; DX404.004.

Third, PHA cross-examined Draper on this point, and the jury’s award––

substantially less than Zachry sought––accounted for any weight the jury gave it.

39

53:29-32; America’s Favorite Chicken Co. v. Samaras, 929 S.W.2d 617, 629

(Tex.App.—San Antonio 1996, writ denied).

2. Draper’s treatment of sheet-pile installation was supported by the evidence.

PHA contends “it is undisputed…Zachry was not ready to install…sheet pile

until after November 15—40 days later than Draper assumed.” PHASupp:31. 9

But PHA’s citations provide no support. PHA relies on Anderson’s testimony

referencing a November 15 list of remaining tasks. Neither that list nor

Anderson’s testimony references sheet-pile-installation timing for the frozen-cutoff

wall, because it was rejected a month earlier. See DX91; 16:29-31; 14:93-104.

PHA nevertheless inserts “frozen” into Anderson’s testimony “that there was work

to be done before we were ready for the [frozen] cutoff wall.” PHASupp:31. But

Anderson was discussing the status as of November 15—when Zachry was

considering the alternate-cutoff wall’s viability. See p.19-20. PHA’s argument

incorrectly assumes that, after PHA's October 11 rejection, Zachry

proceeded exactly as if PHA had not breached. See, e.g., 16:135-36; 54:91.

Even if Anderson was saying work remained as of October 11, Anderson

testified it would take “a couple of days at best.” 14:103; see 16:30. Although

Draper’s schedules showed sheet-pile installation starting October 7, it was on

9 “Sheet pile”—steel sheets—would have lined the frozen-cutoff wall berm and would have composed Mageau’s alternate-cutoff wall. 10:21-22; 11:52-53.

40

“early start,” meaning it could start later with no impact on his analysis. 53:159-

60; 54:91-94; PX580 at 273. Indeed, his schedule’s float allowed sheet-pile

installation to be delayed until November 15 or later. Id. The evidence supports

Draper’s assumption that—absent the breach—Zachry could have accomplished

pre-freeze-down work like sheet-pile installation in time to freeze-down the walls

and complete Milestone-A before the crane-ship arrived. See pp.18-19; 52:14-15.

Third, PHA raised this issue during Anderson’s cross-examination, and the

jury’s award––less than Zachry sought––accounted for any weight the jury gave it.

16:29-31; Samaras, 929 S.W.2d at 629.

B. The evidence establishes causation.

1. Ample evidence supported the jury’s causation finding.

Contrary to PHA’s assertion, expert testimony was not required to prove

PHA’s breach caused Zachry to abandon its dry-construction methodology. See

Helena Chemical Co. v. Wilkins, 47 S.W.3d 486, 504 (Tex. 2001) (non-expert

testimony may establish causation, exclude alternative causes).

Abundant evidence supported the jury’s finding that PHA’s rejection of the

frozen-cutoff wall caused Zachry to switch to a wet-construction methodology.

See pp.16-21. Anderson and geotechnical expert Hugh Lacy testified that—in the

face of PHA’s rejection of the frozen-cutoff wall—Zachry had no viable

alternative-cutoff wall to bifurcate the project and complete the wharf in the dry

41

while still allowing the crane-ship to dock, and thus had to switch to the wet far

earlier than it otherwise would have. 19:32-50; 42:59-104; p.19-20.10

2. PHA’s “Contract completion deadline” argument fails.

PHA asserts Draper did not opine that Zachry could have met the Contract

deadlines by working in the dry with the frozen-cutoff wall. PHASupp:34-35. But

Zachry was not required to show it would have completed all its work in the dry by

the Contract deadlines to prove the R&R Order caused Zachry’s damages. The

jury could have reasonably found a causal connection between PHA’s breach and

the damages awarded based on evidence showing PHA’s breach caused Zachry to

use a wet approach for a far greater portion of the work than if Zachry had been

allowed to use the frozen-cutoff wall. 52:41-43, 94-97, 102-07; p.17-18; Abraxis

Petrol Corp. v. Hornburg, 20 S.W.3d 741, 758 (Tex.App.—El Paso 2000, no pet.).

Draper calculated that increased cost, 52:110-11, and excluded the cost of work

Zachry would have performed in the wet even with the frozen-cutoff wall, 52:41-

43, 94-98; 10:59-62. PHA’s contention that Zachry failed to prove causation

because Draper’s model assumed a small amount of work in the wet is unfounded.

But even if required, Zachry presented ample evidence it would have

completed Milestone-A in the dry by February 15, 2006, if PHA had not rejected

the frozen-cutoff wall. See, e.g., PX320; 30:115-16; PX357; 19:43-45; 18:107-11; 10 PHA’s argument that Zachry’s schedules showed Zachry finishing faster and cheaper by abandoning its dry methodology was debunked at trial. See pp.19-20, 36-37.

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32:100-01; PX893.0055; PX251; PX252; 26:100-02; 45:103-05; see also 29:35-36,

115-16; 123-24; pp.18-19. 11 Other evidence showed that absent PHA’s breach,

Zachry could have completed Milestone-A by May 15, 2006—the crane-ship’s

actual arrival date, see, e.g., id.; 56:96-97; pp.18-19,—and achieved final

completion by the Contract deadline, 16:102-04; PX771; 19:86-90; 18:115-18;

27:40-42; 35:57-58. PHA ignores this evidence and that Draper adopted a

conservative approach in preparing his analysis. 52:60-63.

3. PHA’s “alternative cause” argument fails.

PHA incorrectly argues Draper “failed to rule out alternative causes of

Zachry’s switch to working ‘in the wet.’” PHASupp:33. Expert testimony was not

required to rule out alternative causes. See p.40.

PHA’s suggestion Zachry was planning on eliminating the freeze-wall was

refuted by evidence establishing that, until the R&R Order, Zachry intended to use

the freeze-walls and was building the wharf and freeze-walls consistent with that

intent. See 10:99-102, 118, 124; 19:33; 35:63. Anderson testified that in the

absence of an alternative-cutoff wall, Zachry’s only option was to work in the wet.

18:151-57; 19:32-50; see also pp.17, 19-21. And geotechnical expert Lacy offered

unrebutted expert testimony that the alternative-cutoff wall design was not safe or

11 Anderson also testified about scheduling and construction progress in light of his construction experience and first-hand observation of the work. 9:81-86, 94, 101-02, 109-110; 11:49-50, 82- 86, 91-93; 12:111; 18:64-65, 115-25, 151-57; 19:32-76. Anderson testified Zachry would have timely completed the project with the frozen-cutoff wall. 19:43-45.

43

feasible. 42:59-104. The jury could reasonably have found that—in the absence of

a viable alternative method to bifurcate construction and allow the crane-ship to

dock—PHA’s rejection of the frozen-cutoff wall, demands that Zachry comply

with the Contract deadlines, and threats of LDs forced Zachry to switch to a

predominantly wet methodology earlier than it otherwise would have. See pp.16-

21.

Finally, PHA’s argument that Anderson offered conclusory testimony lacks

merit. Anderson was questioned for days regarding scheduling options he

analyzed after PHA’s breach. See, e.g., 11:49-50, 83-86; 18:124-25, 151-57;

19:32-45, 50-60. Anderson’s contemporaneously prepared schedules showed that,

without a frozen-cutoff wall, Zachry could only dock the crane-ship if it moved to

wet construction far earlier than planned. Id.

C. PHA’s lack-of-authority argument does not defeat causation. PHA contends that because “Thiess had no authority [under Special

Condition §12(d)] to change Contract terms, Thiess’s R&R response could

not…have caused Zachry’s R&R damages.” PHASupp:38-39. However, §12(d) is

inapplicable: the R&R Order was not a change to the Contract, but a breach. Cf.

p.45-48.

Furthermore, PHA’s argument is based on the incorrect premise that “Thiess

issued the R&R response.” PHASupp:37. The R&R Order, which bore PHA’s

44

seal, was PHA’s decision and act; Thiess (with PHA’s McQueen) was simply

PHA’s messenger. 8:16; 46:50-51, 53-54; PX266(A33); PX314(A34); DX1-

1.0244, §12(c)(A16). The day before the R&R Order issued, PHA’s McQueen

told Thiess and Ely, “[t]he cutoff wall was rejected.” PX1(A32). Vincent

concurred. 46:39.

But even if Thiess made the R&R-Order decision, it would still have been

PHA’s act. Chief Engineer DeWolf testified he delegated his §5.22 authority to

review safety-related Submittals to PHA’s Vincent and McQueen, who were

responsible for getting CH2M-Hill’s assistance. 8:16. Apparent authority is a fact

issue. See p.62.

Moreover, other PHA acts caused Zachry’s damages. Three days after the

R&R Order’s issuance, Chief Engineer DeWolf sent Zachry a letter demanding

Zachry finish by the Contract deadlines (which were conditioned on use of the

frozen-cutoff wall) and threatening LDs. PX319; 19:29-31. DeWolf’s superiors

repeated this demand in October and November. See p.17. By demanding a

recovery schedule after barring Zachry from using its “required” frozen-cutoff

wall, PHA—not Thiess—forced Zachry to spend more money and time building

the newly extended wharf in the wet. See pp.17-18, 21-22.

The Water Code and Chapter 271 impose no bar: the Contract PHA

breached was undisputedly written and properly executed as required by PHA’s

45

cited statutes. See PHASupp:37-38 (citing TEX. WATER CODE §60.408(i); TEX.

LOC. GOV’T CODE §§271.151(2), 271.152)(A42).

III. Sections 5.41 and 5.42 do not bar Zachry’s breach-of-contract claim.

A. The “changes” clauses are inapplicable by their terms. By their plain terms, §5.41 and §5.42 do not apply to breach-of-contract

claims for damages. Instead, they set forth procedures allowing PHA to make

changes within the scope of the Work during performance of the Contract, either

through Change Orders (§5.41) or “Changed Conditions or Contract

Interpretations” (§5.42).

Section 5.41 applies to “changes and modifications to the Contract

Documents within the general scope of the Work,” and requires a Change Order to

“stipulate the Work to be performed” and “any difference in the Contract Price.”

DX1-1.0224-25(A13). Similarly, §5.42 requires five days’ notice of any

“interpretation of the Contract” by PHA “the Contractor believes...constitutes a

change to the Contract,” “[i]f the Contractor believes it is entitled to an adjustment

in the Contract Time [or] Contract Price.” DX1-1.0225(A13). The Chief

Engineer’s determination as to whether there should be a “modification” or

“equitable adjustment” is “final and conclusive,” and the Contractor is forbidden to

“begin performing that portion of the Work affected by such interpretation” before

giving notice. Id.

46

Zachry does not assert that in forbidding Zachry to use the frozen-cutoff

wall, PHA effected “changes or modifications to the Contract Documents within

the general scope of the Work” as in §5.41, or that PHA made an “interpretation

of the Contract” that “constitutes a change to the Contract” as in §5.42. Rather,

PHA breached the Contract and CO4 by rejecting the frozen-cutoff wall. Thus,

Zachry never sought the “difference in the Contract Price” under §5.41 nor “an

adjustment in the...Contract Price” under §5.42. Rather, Zachry sought—and the

jury properly awarded—damages for PHA’s breach of the Contract. CR29:08142-

44(A8); CR59:17390-93(A4). Furthermore, §§5.41/5.42 apply only to changes

relating to “the Work,” which does not include Zachry’s means and methods. See

p.30.

Authorities recognize that “changes” clauses like §§5.41/5.42 do not apply

to claims the owner breached and is liable for damages. See, e.g., Shintech, Inc. v.

Group Constructors, Inc., 688 S.W.2d 144, 151-52 (Tex.App.—Houston [14th

Dist.] 1985, no writ) (delay damages recoverable despite “changes” clause); Board

of Regents v. S&G Constr. Co., 529 S.W.2d 90, 97 (Tex.Civ.App.—Austin 1975,

writ ref’d n.r.e.). Instead, “changes” clauses are a “vehicle to add or delete work,

substitute materials, alter geographic locations, increase or decrease quantities,

extend or reduce contract time and adjust contract price....” 1 BRUNER &

O’CONNOR CONSTR. LAW §4.23. They “necessarily exclude[] the power to

47

unilaterally change the terms of the contract or its general risk-allocation

provisions, as distinguished from the work itself.” Id. §4:23.

For example, §5.42 would apply if the specifications required “steel,” and

PHA interpreted that to mean galvanized steel, but Zachry believed black steel

complied. RR16:62. But §5.42 would not allow PHA to unilaterally change the

Contract’s General Conditions precluding PHA from interfering with Zachry’s

methods or CO4’s frozen-cutoff-wall authorization.

S&G rejected the owner’s argument that the contractor could recover for

breach only under the change-order provision, holding the argument ignored the

difference between (1) suits seeking breach-of-contract damages and (2) suits

seeking additional compensation in the absence of a breach. 529 S.W.2d at 96-97.

“Changes” clauses apply only to (2), and S&G distinguished cases (cited by PHA)

applying “changes” clauses, finding there was no breach in those cases. Id.

(distinguishing State v. Martin Bros., 160 S.W.2d 58 (Tex. 1942); State v. F&C

Eng’g Co., 438 S.W.2d 647 (Tex.Civ.App.—Houston [14th Dist.] 1969, writ ref’d

n.r.e.)).

PHA’s reading also improperly fails to construe §§5.41/5.42 in light of the

entire contract. Frost, 165 S.W.3d at 312. PHA knew how to write a condition

precedent to filing a lawsuit, but did not in §§5.41/5.42. DX1-1.0230, §5.55(A13).

Furthermore, according to PHA, every PHA breach would be a “change” PHA’s

48

Chief Engineer had the right to make under §5.41 or an

“interpretation...constituting a change” for which the Chief Engineer was the final

arbiter under §5.42. Zachry could never recover damages, because its remedy

would be a “claim for compensation” calculated under §5.43. DX1-1.0225-26,

§5.43(A13). PHA’s reading fails to give meaning to other contract clauses

recognizing PHA could have liability under the contract not only for a “claim for

compensation” but also a “claim for damages.” DX1-1.0192, §2.03(A13); see

DX1-1.0217, §5.16(A13); DX1-1.0217, §5.19(A13).

At a minimum, Zachry’s reading of §§5.41/5.42 as inapplicable to breach-

of-contract claims is reasonable. Any ambiguity should be construed against PHA

as the drafter. See S&G, 529 S.W.2d at 99; p.3-4. Furthermore, “forfeiture by

finding a condition precedent is to be avoided when another reasonable reading…

is possible.” Criswell v. European Crossroads Shopping Ctr., 792 S.W.2d 945,

948 (Tex. 1990). Even if ambiguous, §§5.41/5.42 should be construed not to

impose a condition precedent to breach-of-contract recovery.

B. Alternatively, common-law and statutory rules preclude application of the “changes” clauses here.

1. The Shintech doctrine.

Even if §§5.41/5.42 apply to breach-of-contract claims, the trial court

correctly held that they do not bar Zachry’s claim. “[W]hen an owner breaches a

construction contract, it relinquishes its contractual procedural rights concerning

49

change orders and claims for additional costs.” Shintech, 688 S.W.2d at 151. This

Court and others have held Shintech precludes breaching owners like PHA from

invoking procedural clauses to bar contractors’ claims. See, e.g., Shintech, 688

S.W.2d at 151 (written-notice requirement); West v. Triple B Servs., LLP, 264

S.W.3d 440, 446-47 & n.4, 449-50 (Tex.App.—Houston [14th Dist.] 2008, no writ)

(30-day notice requirement); North Harris Cty. Jr. College Dist. v. Fleetwood

Constr. Co., 604 S.W.2d 247, 254 (Tex.Civ.App.—Houston [14th Dist.] 1980, writ

ref’d n.r.e.) (change-order requirement); S&G, 529 S.W.2d at 96 (same).

a. Green does not preclude application of Shintech.

PHA’s argument that Shintech does not apply if the contractor continued to

perform after the breach is incorrect: in the cases above, the contractors continued

to perform after defendants’ breaches.

Nor does Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 389 (Tex. 1997),

support PHA. In Green, the general contractor asserted the subcontractor’s lien

releases barred its claim for extra work. Id. at 388. The Supreme Court disagreed,

but for a different reason than the Court of Appeals, which had characterized the

question as a Shintech problem—whether the general contractor relinquished

procedural rights by breaching. In dictum, the Supreme Court recognized the

question in Green was instead whether “the remedy of excuse of performance”

applied—that is, whether the breaching defendant was precluded from relying on

50

its substantive right to a lien release to bar its subcontractor’s claims. The

Supreme Court did not address the Shintech rule. See id. at 389.

Green’s citation of Hanks v. GAB Bus. Servs., 644 S.W.2d 707 (Tex. 1982),

confirms the Court did not reject Shintech, but rather recognized its inapplicability

to substantive contract rights. Like Green, Hanks involved a nonbreaching

plaintiff’s failure to perform a substantive requirement: the defendant-buyer of a

business asserted the plaintiff-seller’s breach of a covenant-not-to-compete

excused the buyer’s failure to pay the full price. 644 S.W.2d at 708. Hanks relied

on S&G to hold that the nonbreaching party’s performance was not excused

because it continued to perform. Id. The Court did not disavow S&G’s application

of the Shintech rule to procedural requirements. Compare id., with S&G, 529

S.W.2d at 96.

b. Technip does not preclude application of Shintech.

Tennessee Gas Pipeline v. Technip USA Corp., 2008 WL 3876141

(Tex.App.—Houston [1st Dist.] 2008, pet. denied), is distinguishable. It involved a

provision requiring the owner to give notice of defective work. Id. at *17. As the

Court observed, if the contractor’s alleged breach based on defective work excused

the owner from giving notice of defective work, the provision would never apply,

rendering it “meaningless.” Id. at *23 n.11. The court did not disapprove but

distinguished cases—including Fleetwood—holding when an owner breaches a

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building contract, it relinquishes procedural rights concerning change orders and

additional-cost claims. Id. Technip’s refusal to apply the Shintech rule turned not

on the fact that the provision required notice, but rather that applying the provision

as the owner argued would require “circular reasoning” rendering it “without

effect.” Id.

In contrast, applying Shintech here would not render §5.42 “without effect,”

as it would still apply in the absence of a breach to differing Contract

interpretations relating to the Work when the contractor seeks an adjustment to the

Contract Price/Time. Indeed, this Court has applied Shintech to failures to comply

with notice provisions. See, e.g., p.49.

2. The radical-change doctrine.

The trial court also concluded that §§5.41/5.42 are inapplicable to Zachry’s

claim by analogy to the radical-change doctrine. Under this doctrine, “changes”

clauses do not apply to changes “requir[ing] contractors to perform large quantities

of work, radically different in its character, nature, and cost from that originally

contemplated....” B.F.&C.M. Davis v. W.E. Callaghan Constr., 298 S.W. 273, 279

(Tex.Comm’nApp. 1927). The trial court’s analogy did not turn Zachry’s claim

for breach of the written Contract into an implied-contract claim. Besides, a

radical change can constitute a breach giving rise to damages (not quantum

52

meruit). See Nat’l Env’l Serv. v. Homeplace Homes, 961 S.W.2d 632, 635 & n.3

(Tex.App.—San Antonio 1998, no writ).

3. Section §16.071.

According to PHA, §5.42 makes giving 5-days’ notice of Zachry’s breach-

of-contract-damages claim a condition precedent to suit. However, any “contract

stipulation that requires a claimant to give notice” “within less than 90 days” “of a

claim for damages as a condition precedent to the right to sue on the contract” is

“void.” TEX. CIV. PRAC. & REM. CODE §16.071(a)(A43); see Taber v. W. Union

Tele. Co., 137 S.W. 106, 109 (Tex. 1911); Atwood Oceanics v. Zust Bachmeier,

2007 WL 2766192, *1 (5th Cir. 2007).

American Airlines Emp. Federal Credit Union v. Martin, 29 S.W.3d 86

(Tex. 2000), is distinguishable. That clause required a bank customer to give

notice of unauthorized signatures or be barred from asserting they were

unauthorized. Id. at 91-92. In contrast, PHA argues §5.42 requires Zachry to give

5-days’ notice of its breach-of-contract-damages claim and that failure to do so

bars Zachry’s claim. Plus, in PHA’s view, §5.42 gives PHA the “final and

conclusive” right to decide the correct “interpretation” and thus whether there was

a breach. Unlike American, where the clause’s purpose was to inform the bank of

unauthorized signatures, §5.42 (under PHA’s reading) has no purpose except to bar

53

Zachry’s breach-of-contract claim.12

C. The “changes” clauses were not tried.

PHA asserts that whether Zachry complied with §§5.41/5.42 was tried to the

jury, that Zachry failed to prove that it obtained a change order or gave notice, and

that rendition is appropriate. However, Zachry’s compliance with these clauses

was expressly not tried, because the court held pre-trial that §§5.41/5.42 are

inapplicable to Zachry’s claims. CR46:13299-301, 13305(A5). Zachry was not

required to continue litigating these issues. Provident Life & Accident Ins. v.

Hazlitt, 216 S.W.2d 805, 807 (Tex. 1949). Although the jury was instructed that it

may consider §§5.41/5.42 for state of mind, it was not required. See, e.g., 49:112;

CR59:17392(A4).13 Indeed, the jury was instructed Zachry was not required to

obtain a §5.41 Change Order or give §5.42 notice. CR59:17392(A4). Zachry had

no obligation to offer evidence on §§5.41/5.42. But if §5.42 notice was tried,

Zachry substantially complied. See Aple.Br:61 n.54; 11:39-40; PX2(A35);

PX314(A34); 27:89-90, 93-94; 35:95-96; p.16.

12 PHA asserts the notice period should be reformed to 90 days under Contract §3.12. PHASupp:46 n.3. However, §3.12 is an unenforceable agreement to agree. Ft. Worth ISD v. City of Ft. Worth, 22 S.W.3d 831, 846 (Tex. 2000); CR42:12179. PHA never sought reformation on any other basis. 13 PHA notes the instruction also concerned §5.52. PHASupp:45 n.2. Zachry’s §§5.41/5.42 arguments apply equally to §5.52.

54

D. If the trial court erred, remand—not rendition—is required.

Even if §§5.41/5.42 could reasonably be read to govern Zachry’s recovery of

breach-of-contract damages—which Zachry disputes—the proper remedy is not

rendition, but rather remand to permit Zachry to offer evidence. County of Dallas

v. Wiland, 216 S.W.3d 344, 357 (Tex. 2007). Zachry’s reading—that these clauses

do not apply to its damages claim for breach of §5.10/CO4—is at least one

reasonable reading. Accordingly, if not resolved by rules of construction in

Zachry’s favor, a jury should resolve this dispute. Alternatively, a jury should

determine whether Zachry substantially complied with §5.42. Finally, PHA must

prove prejudice from any lack of notice. Prodigy Comms. Corp. v. Agricultural

Excess & Surplus Ins., 288 S.W.3d 374, 377-78 (Tex. 2009).

E. Zachry’s failure to seek a §5.08 extension was irrelevant. Zachry’s failure to seek a §5.08 time extension for PHA’s breach was

irrelevant: Zachry sought damages—not a time extension—for PHA’s breach.

Requesting a §5.08 extension was not a prerequisite to damages.

Furthermore, §5.22 states, “revision and…resubmission of Submittals shall

not entitle…Contractor to any extension of time.” DX1-1.0219(A13). Zachry’s

failure to request an extension for PHA’s R&R Order thus proves nothing.

Additionally, any suggestion Zachry had to request an extension would have

caused unfair prejudice. TEX. R. CIV. P. 403. And PHA shows no harm.

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IV. The trial court did not abuse its discretion in excluding PHA’s $8.6 million in alleged harms claimed as offsets. PHA asserts the trial court improperly “denied PHA its offset defense” by

excluding PHA’s evidence that it allegedly suffered $8.6 million in harms from

Zachry’s performance. PHASupp:50. Parties must timely disclose their theories

of the case and amount of damages—for defenses as well as claims—or face

mandatory exclusion. TEX. R. CIV. P. 193.1, 193.6, 194.2(c), (d) & cmt.; Alvarado

v. Farah Mfg., 830 S.W.2d 911, 914 (Tex. 1992) (“The rule is mandatory, and its

sole sanction—exclusion of evidence—is automatic….”); Harris Cty. v. Inter Nos,

Ltd., 199 S.W.3d 363, 367-68 (Tex.Civ.App.—Houston [1st Dist.] 2006, no pet.)

(litigant must disclose basis for contesting damages). The interpretation of

pleadings and determination of the adequacy of disclosures are within the trial

court’s discretion. See Secure Comm. v. Anderson, 31 S.W.3d 428, 430 n.2

(Tex.App.—Austin 2000, no pet.); Robinson v. Lubbering, 2011 WL 749197, *3, 7

(Tex.App.—Austin 2011, no pet.).

The trial court did not abuse its discretion in excluding PHA’s alleged $8.6

million in harms, because as shown below, PHA’s limited disclosures of alleged

harms were made solely in connection with its attempt to prove the LD clauses

were reasonable forecasts of just compensation and thus enforceable. They did not

give Zachry notice that PHA intended to seek an $8.6 million jury finding on an

offset defense to be deducted from Zachry’s damages award. An $8.6-million-

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offset claim would have required Zachry to conduct substantial discovery into

whether PHA sustained the harms, causation, and quantification.

From this suit’s beginning in 2006, Zachry sued for sums PHA wrongfully

withheld, including the $25,000/day LDs for Milestone-A. CR1:00005;

CR4:00934. When PHA disclosed—for the first time on June 3, 2009—that it

sustained actual damages, its disclosure was solely in the context of arguing the

LD provisions were a “reasonable forecast of just compensation because…the Port

Authority sustained actual damages in an amount that was not disproportionate to

the [LDs].” CR45:13023, ¶41(A9). The next day, PHA filed its Second Amended

Disclosures stating PHA had suffered general categories of actual damages, but

again solely in the context of arguing the LD provisions were enforceable:

The difficulty of quantifying and proving…actual damages is one…reason[] the parties included liquidated damages provisions in the Contract…The [LD] provisions are enforceable….The [LDs] were a reasonable forecast of just compensation because…[PHA] sustained actual damages in an amount that is not disproportionate to the [LDs] ….

CR46:13076(A10).

Zachry immediately sent PHA an interrogatory on June 11 asking it to

quantify these harms. CR46:13105(A11). That PHA responded by Zachry’s July

24 deadline by quantifying more than $8 million in alleged actual harms does not

help PHA: Zachry sent its interrogatory in response to PHA’s disclosure that it

suffered harm proportional to its LDs, and PHA’s response again referenced the

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difficulty in “know[ing] the precise nature and extent of damages,” and did not

disclose it sought to offset them against Zachry’s damages. CR46:13108(A11);

see CR46:13105-10(A11). And PHA’s general, conclusory pleadings of an offset

defense failed to notify Zachry of the amount of damages PHA sought to offset.

See PHASupp:51 (citing CR47:13428, §57).

Even if these disclosures were not limited to LDs, the trial court did not

abuse its discretion in excluding them as untimely. Trial had been scheduled to

begin July 20, 2009, and the discovery deadline had lapsed six months earlier, on

January 16. CR45:12933; CR17:04679. See Sprague v. Sprague, 363 S.W.3d 788,

800 (Tex.App.—Houston [14th Dist.] 2012, pet. denied) (continuance does not

nullify scheduling-order deadlines).

PHA later increased its claimed harms to approximately $10.5 million on

September 16, but continued to make this disclosure in the LD context.

CR46:13117-20. Nothing disclosed PHA intended to submit these harms to the

jury as an offset defense to reduce Zachry’s damages. Indeed, PHA’s September

17 draft charge did not seek any finding as to PHA’s actual damages for an offset

defense to reduce Zachry’s damages award. See CR43:12401-20(A12).

Not until the eve of trial did PHA reveal it intended to seek an $8.6 million

alleged-harms offset as a defense to reduce Zachry’s damages. (10/9/09):19-21.

The trial court correctly ruled PHA disclosed the harms only in support of the LD

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provision, not as an offset defense. CR51:14949-51(A6). It also correctly found

PHA failed to show good cause and that injection of the $8.6 million in alleged

harms would require extensive discovery and “dramatically change the landscape

of what promises to be a lengthy and complicated trial.” CR51:14951-52(A6).

The trial court did not abuse its discretion.

V. PHA’s “open-the-door” theory did not support admission of PHA’s alleged harms regarding the no-damages-for-delay exceptions.

A. The trial court properly excluded PHA’s actual-harms evidence under Rule 403.

PHA contends the trial court erred in refusing to allow PHA to prove—with

respect to the bad-faith and arbitrary-and-capricious no-damages-for-delay

exceptions—that PHA suffered actual harm to rebut a purported “misimpression”

Zachry allegedly gave the jury. PHASupp:54-56. But Zachry never opened the

door to PHA’s claimed harm.

Zachry never argued PHA suffered no harm at all. Rather, Zachry argued

PHA:

(1) promised not to charge Milestone-A LDs if the crane-ship was able to dock on arrival, but

(2) nevertheless charged LDs even though the crane-ship was able to dock on arrival.

See, e.g., 4:51; 25:61-62, 66-68; 71:98; p.10. Zachry did not argue PHA:

(1) promised it would not charge LDs if it suffered no harm at all, but

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(2) charged LDs even though it suffered no harm.

At most Zachry opened the door to evidence the ship was not able to dock

on arrival—evidence that did not exist, as the ship was able to dock on arrival. See

p.22. There was no misleading impression.

Moreover, any probative value of PHA’s actual-harms evidence in refuting

any minor misimpression would be substantially outweighed by undue delay and

the unfair prejudice to Zachry. 1SCR6:1116(A7). The trial court noted direct and

cross-examination of PHA witnesses would be lengthy and could devolve into a

long battle over the alleged harms, causation, and quantification. Id. Plus,

requiring Zachry to cross-examine without discovery would be highly prejudicial.

Id.

PHA incorrectly contends once evidence is deemed admissible under an

open-the-door theory, Rule 403 cannot exclude it. But PHA’s case reached no

such holding. See PHASupp:55-56 (citing Horizon/CMS Healthcare. v. Auld, 34

S.W.3d 887, 905-07 (Tex. 2000)). Authorities have concluded that “even if a party

opens the door to rebuttal evidence, the trial judge still has the discretion to

exclude the evidence under Rule 403.” Hayden v. State, 296 S.W.3d 549, 554

(Tex. Crim. App. 2009); accord Brown & Rondon, TEXAS RULES OF EVIDENCE

HANDBOOK §107, at 95 (2015); Goode, Wellborn & Sharlot, 1 TEX. PRACTICE:

TEX. RULES OF EVID. 107.1 (3d ed. 2015); McCormick, The New Code of

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Evidence, TEX. L. REV. 661, 673 (June 1942).

B. Any error was harmless. The case did not turn on actual-harms evidence: any misimpression was

minimal, as Zachry argued only that PHA said it would not charge LDs if the

crane-ship docked on arrival—not if PHA suffered no harm at all, p.10; PHA’s

evidence of harms from the Milestone-A delay was nonexistent, 26:16-17, 20-21,

or weak at best, 67:5-10; 70:15-27; and PHA did offer actual-harms evidence,

35:24-26; 64:44-45; 65:57-59; DX419; Aplt.Br:68. Plus, other evidence—

including PHA’s last-minute rejection of Zachry’s methods PHA knew were

“required”—supported the arbitrary-and-capricious and bad-faith findings. See

pp.5-9, 11-22.

VI. The trial court did not err in instructing the jury as to fraud.

A. The Supreme Court approved the recklessness instruction. The Supreme Court rejected PHA’s argument—briefed in that Court—that

recklessness does not support a promise-of-future-performance-made-with-an-

intent-not-to-perform fraud: it quoted the fraud charge in full, and held “[t]he

charge correctly described the misconduct that cannot be covered by a no-

damages-for-delay provision.” Zachry, 449 S.W.3d at 104 n.7, 118(A3). In its

rehearing motion, PHA asked the Court to reconsider this holding,

PHAMot/Reh’g:25, but it declined.

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Authorities confirm a promise with no intent to perform may be based on

either knowledge of falsity or recklessness. See Beneficial Personnel Servs. v. Rey,

927 S.W.2d 157, 167-70 (Tex.App.—El Paso 1996, vac. w.r.m.); Mann v.

Fitzhugh-Straus Medina Ranch, 640 S.W.2d 367, 371 (Tex.App.—San Antonio

1982, no writ); TEX. P.J.C. BUSINESS §§105.2, 105.3B. PHA’s first four cases do

not consider whether promise-with-no-intent-to-perform fraud can be based on

recklessness. See PHASupp:57. The last three contain no analysis, and cannot

overrule the Supreme Court’s Zachry decision. Id.

B. No charge error tainted the no-damages-for-delay exceptions. Assuming error, PHA asserts a new trial is required because the jury might

have concluded PHA was reckless. PHASupp:57. But there is ample evidence

PHA intentionally defrauded Zachry as PHA defines it. See Zachry, 449 S.W.3d at

103(A3); pp.10-11; Aple.Br:48-50. Any error was harmless.

Furthermore, Casteel would not require retrial, because it is “reasonably

certain” the jury was “not significantly influenced” by the allegedly erroneous

fraud issue, since PHA never challenged the evidentiary sufficiency of the other

no-damages-for-delay exceptions. See Thota v. Young, 366 S.W.3d 678, 688 (Tex.

2012); Aple.Br:48-49 n.38.

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VII. The apparent-authority instructions were proper.

A. Apparent authority is a fact issue. Section 12(d)’s limits on Thiess’s authority to “change” the Contract are

irrelevant to Zachry’s claim PHA breached it. Cf. pp.45-48. PHA’s assertion

Thiess—not PHA—directed Zachry to work in the wet is likewise incorrect. See

p.43-44.14

Regardless, apparent authority is a fact issue even when limitations are

present. See Equitable Life Assur. Soc’y v. Ellis, 147 S.W. 1152, 1158 (Tex.

1912); Paramount Nat’l Life Ins. v. Williams, 772 S.W.2d 255, 261-62

(Tex.App.—Houston [14th Dist.] 1989, writ denied). PHA’s case merely holds that

if the only evidence regarding apparent authority is a limitation, the limit controls.

See Douglass v. Panama, 504 S.W.2d 776, 779 (Tex. 1974).

CH2M-Hill and Theiss had apparent authority to convey decisions and

information to and from Zachry on PHA’s behalf:

Q. And you had designated in your dealings with Zachry, CH2M-Hill to be your representative for those purposes in exchanging information back and forth…?

A. [DeWolf]: That was one of their roles, yes. 14 PHA’s additional-work argument appears limited to its incorrect causation argument. PHA does not challenge damages under TEX. LOC. GOV’T CODE §271.153(a)(2)’s additional-work measure. Nor could it: the Supreme Court confirmed delay damages are recoverable under §271.153(a)(1), and PHA obtained an order finding 100% of Zachry’s damages are delay damages. CR60:17517-18; 60:17526. The Court can be “reasonably certain” the jury was “not significantly influenced” by the additional-work measure (which was proper anyway, Aple.Br:50-52). See Thota, 366 S.W.3d at 688.

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6:86; see 6:84-87; 8:44-46; 25:9-12. Other evidence proved PHA expected Zachry

to rely on CH2M-Hill communications, 6:85-86; 8:45-46; 21:34; 44:47-48;

CH2M-Hill was DeWolf's representative, 8:45-46; DX1-1.0244, §12(c)(A16);

CH2M-Hill was PHA’s primary point-of-contact with Zachry, 44:43-44; see 37:36;

and PHA executives treated CH2M-Hill like PHA staff, 46:74-75.

Additionally, the PHA-approved Construction Management Plan—posted on

the Constructware website for Zachry to view—told Zachry CH2M-Hill is “an

extension of the PHA staff,” would “act as [PHA’s] representative on site,” and

would “have all authority normally attributed to a [construction manager] acting as

owner’s agent (not at risk).” PX57.0009, §2.2(A39); see 9:46-47; 37:37-38; 44:54-

58; 47:156-57; see also 44:44; 68:101; 69:106.

Thus, even if §5.42 notice was tried, Zachry substantially complied by

giving notice to CH2M-Hill’s Thiess, whom PHA led Zachry to believe was

authorized to accept such information for PHA. See pp.62-63.

B. Zachry pleaded apparent authority. The trial court’s determination that Zachry pleaded apparent authority was

within its “broad discretion when interpreting pleadings.” Pace Concerts v.

Resendez, 72 S.W.3d 700, 703 (Tex.App.—San Antonio 2002, pet. denied).

Zachry pleaded PHA “expressly charged and designated its Construction Manager,

CH2M-Hill, to act on its behalf on this critical cutoff-wall issue.” CR29:8137,

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¶13(A8); see id. at 8138, ¶13 (calling CH2M-Hill “PHA’s designated agent”).

Zachry also alleged PHA took actions a non-human entity like PHA could only

take through agents. See id. at 8133-46. Because PHA did not specially except,

Zachry’s pleadings are construed “liberally…to include all claims that reasonably

may be inferred….” Allison v. Service Lloyds Ins., 437 S.W.3d 589, 592 n.2

(Tex.App.—Houston [14th Dist.] 2014, pet. denied).

Zachry’s agency allegation is not limited to actual authority. Both actual

and apparent authority are based on a principal's designation of authority; they

differ only as to whether the designation is communicated to the agent or a third

party. See In re ADM Inv. Servs., 304 S.W.3d 371, 374 (Tex. 2010). Courts have

held apparent authority alleged in the absence of those words. See, e.g., Iron Mtn.

Bison Ranch v. Easley Trailer Mfg., 42 S.W.3d 149, 157 (Tex.App.—Amarillo

2000, no pet.); Cox v. Humble Oil & Refining, 16 S.W.2d 285, 286 (Tex.Comm’n

App.1929); Chapapas v. Delhi Taylor Oil, 323 S.W.2d 64, 66 (Tex.Civ.App.—San

Antonio 1959, writ ref'd n.r.e.).

VIII. PHA is not entitled to attorneys’ fees if Zachry prevails on any theory.

PHA is not entitled to attorneys’ fees because judgment for Zachry should

be affirmed. See DX1-1.0201, §3.10(A13).

Even if Zachry does not prevail on its R&R-Order breach-of-contract theory,

PHA is not entitled to attorneys’ fees. Contract §3.10 permits PHA to recover fees

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on the Contractor’s claim only “[i]f…Contractor does not prevail with respect to

such claim.” DX1-1.0201(A13). A party prevails if it recovers some relief on its

claim, regardless of the amount. Intercontinental Grp. Ptnrshp. v. KB Home Lone

Star, 295 S.W.3d 650, 654 (Tex. 2009); Flagship Hotel. v. City of Galveston, 117

S.W.3d 552, 564 (Tex.App.—Texarkana 2003, pet. denied). “[I]t is the judgment,

not the verdict, that we must consider in determining whether attorneys’ fees are

proper.” Intercontinental, 295 S.W.3d at 656.

Zachry brought one claim: breach of contract. CR29:08142-44. Zachry

asserted PHA breached the parties’ Contract in multiple ways, including by issuing

the R&R Order and withholding LDs. The judgment awarded Zachry one lump

sum for this breach-of-contract claim, without distinguishing between damages for

each underlying theory. CR62:18166(A1).

Indeed, Texas law holds a single claim may include multiple liability

theories, and a plaintiff prevails on that single claim if it prevails on any theory.

See, e.g., 4901 Main, Inc. v. TAS Automotive, 187 S.W.3d 627, 633-35

(Tex.App.—Houston [14th Dist.] 2006, no pet.); Flagship Hotel, 117 S.W.3d at

564-66; Solar Soccer Club v. Prince of Peace Luth. Church, 234 S.W.3d 814, 829

n.2 (Tex.App.—Dallas 2007, pet. denied); Structural Metals, Inc. v. S&C Elec.

Co., 590 Fed. Appx. 298, 305 (5th Cir. 2014). PHA’s cases defining “claim” as

66

“demand for compensation” do not address whether a claim can encompass

multiple theories. See PHASupp:61. 15

Accordingly, if Zachry obtains relief on any theory underlying its breach-of-

contract claim—for example, its judgment for improperly withheld LDs affirmed

by the Supreme Court—then Zachry prevails, and PHA is not entitled to fees.

PHA argues it should recover attorneys’ fees if it wins on the R&R claim

because it is the “main issue.” PHASupp:62-63. But the judgment determines

whether attorneys’ fees are proper. Intercontinental, 295 S.W.3d at 656. As long

as Zachry obtains relief in the judgment on its breach-of-contract claim, regardless

of theory, it prevails. See id. at 654; see Flagship, 117 S.W.3d at 564 (inquiry is

whether agreement was breached, “not the extent of the breach.”). Furthermore,

Intercontinental cast doubt on whether the prevailing party should be determined

by “main issue” analysis. See Intercontinental, 295 S.W.3d at 661; see also id. at

659 n.42.

Even if “main–issue” analysis is viable, when only one party receives

15 PHA implies that because the attorneys’-fee question segregated fees between breach-of- contract theories, Zachry does not assert a single claim. PHASupp:61-62. Nothing required Zachry to object to the Charge—which broke out fees by theory to avoid any need for retrial if Zachry was incorrect—to preserve its argument that Zachry prevails if it wins any breach-of- contract theory.

But Zachry did object. 71:72(A41) (“Attorneys’ fees should not be submitted at all….”).

As here, it argued, “regardless of what happens on the remaining breach-of-contract theories, Zachry will have a net recovery on its breach-of-contract claim, and as a matter of law, [PHA] cannot be the prevailing party.” Id.

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judgment in its favor, “regardless of the amount of damages,” “courts have

concluded that party prevailed on the main issue.” Flagship, 117 S.W.3d at 564.

“Main-issue” analysis applies (if at all) in cases—like those cited by PHA—where

the Court must determine who prevails when neither party obtains relief. See

Bhatia v. Woodlands North Houston Heart Ctr., 396 S.W.3d 658, 663, 671

(Tex.App.—Houston [14th Dist.] 2013, pet. denied); SEECO, Inc. v. K.T. Rock, 416

S.W.3d 664, 666, 674 (Tex.App.—Houston [14th Dist.] 2013, pet. denied).

IX. Zachry’s recovery on its pass-through claim should be affirmed.

On January 1, 2008, Zachry reorganized. PX529; 47:123-29. Under the

new structure, Zachry subcontracted with a new Zachry entity, “the Sub,” to finish

the wharf. Id.; 47:129-31; PX643(A37); PX642(A38). The Sub employed the

same people that worked on the project pre-reorganization. 47:129. Going

forward, the Sub incurred the costs from PHA’s breach. PX642(A38);

PX643(A37); 47:132-34. Zachry must reimburse the Sub for those costs, including

any recovery in this case. Id.

A. Zachry asserts a valid pass-through claim. PHA contends Zachry cannot assert a pass-through claim because it hired

the Sub after PHA’s breach, and thus “PHA’s…breach…did not cause Zachry to

breach the subcontract.” PHASupp:65. But nothing in the seminal case approving

pass-through agreements requires a breach by Zachry. See Interstate Contracting

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Corp. v. City of Dallas, 135 S.W.3d 605, 619-20 (Tex. 2004) (outlining

“requirements”). Interstate requires only that Zachry “remain liable to the

subcontractor for damages sustained by the subcontractor.” Id. at 619.

Interstate also recognizes a general contractor’s decision to hire a sub to

perform work necessitated by the owner’s breach does not preclude the contractor

from recovering the cost for the sub. Id. at 611. “Otherwise, the owner could

receive a windfall because the subcontractor lacked privity with the owner and the

contractor lacked standing to sue the owner for damages suffered by the

subcontractor.” Id. at 615-16.

Here, Zachry established its continuing liability to the Sub for the costs the

jury assessed. In the Management Services Agreement (“MSA”), Zachry promised

(1) “to pay to [the Sub] the Reimbursable Costs” it incurred while performing

Services for Zachry, and (2) to pay to the Sub any payments it received from the

owner. PX643.0004, ¶3.1(A37). In the Pass-Through Agreement, Zachry

“agree[d]...it is liable to [the Sub], to present the ZCC Claims and remit any

recovery from the Port of Houston to [the Sub], in accordance with the terms of

this Agreement.” PX642, ¶1.1(A38). Testimony confirmed Zachry’s continuing

liability to the Sub. 47:127, 130-34.

The burden therefore shifted to PHA to negate this continuing liability: “If

the owner disputes that this requirement [of continuing liability] has been met, it

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bears the burden of proving, as an affirmative defense, that the pass-through

arrangement negates the contractor's responsibility for the costs incurred by the

subcontractor.” 135 S.W.3d at 619-20 (“The owner disproves…contractor’s

continuing liability only if it can show… contractor is not obligated to remit any

recovery to…subcontractor.”).

PHA asserts Zachry might not remain liable to the Sub. PHA speculates—

incorrectly—that owners on other MSA contracts might have paid Zachry more

than the Reimbursable Costs on their contracts, and that any such excess payments

limit Zachry’s liability for Reimbursable Costs for the PHA Contract. PHA’s

argument fails to meet its burden.

First, PHA misunderstands the MSA. It unambiguously states, “Zachry

agrees to pay to Manager [the Sub] the Reimbursable Costs.” PX643.0004,

§3.1(A37). PHA incorrectly reads §3.2 to limit Zachry’s obligation to pay

Reimbursable Costs when Contract Payments exceed Reimbursable Costs. To the

contrary, it unambiguously provides the parties shall divide “such excess amounts”

in “a mutually satisfactory allocation.” Id. at §3.2(A37). Nothing in the MSA

suggests that allocation of “such excess amounts” limits Reimbursable Costs

Zachry must pay to the Sub on other contracts. Id.(A37).

Second, even if PHA reads the MSA correctly, PHA proved no other

contract “windfall” to negate Zachry’s liability for the Sub’s Reimbursable Costs

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on this Contract.

B. The Court correctly charged the jury on pass-through. PHA’s charge-error arguments likewise fail. Zachry unambiguously agreed

to pay the Sub Reimbursable Costs, and PHA failed to negate Zachry’s liability to

the Sub. Accordingly, the trial court properly granted a directed verdict

recognizing the pass-through agreement’s validity and Zachry’s right to recover

the Sub’s damages, and properly declined to charge the jury to include those costs

only “to the extent” Zachry agreed to reimburse the Sub for them. 71:11-13(A40);

CR59:17365-74. Nor was the Court’s instruction that the jury “should” include in

damages any Reimbursable Costs an improper comment.

C. Waiver of immunity applies to the pass-through claims. Nor does immunity bar pass-through claims. City of San Antonio v.

Valemas, 2012 WL 2126932, *7 (Tex.App.—San Antonio 2012, no pet.); Hensel

Phelps Constr. v. McCarthy Bld'g, 2005 WL 1489932, *4 (N.D. Tex. 2005). Cf.

Galveston I.S.D. v. Clear Lake Rehab. Hosp., 324 S.W.3d 802, 810 (Tex.App.—

Houston [14th Dist.] 2010, no pet.) (“§271.152’s waiver…[applies to] a class of

suits—suits for purposes of adjudicating a claim for breach of contract subject to

[Chapter 271]—without restricting which parties can bring suit”) (emphasis

original)).16

16 The pass-through did not evade the no-assignment clause. PHASupp:63 n.6. Zachry expressly did not assign the Contract. PX643.0001, ¶C (A37). Interstate recognized the validity of pass-

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PRAYER

The trial court’s judgment should be affirmed.

Respectfully submitted,

By: /s/ Robin C. Gibbs

REYNOLDS FRIZZELL LLP GIBBS & BRUNS, L.L.P. Brandon T. Allen Robin C. Gibbs State Bar No. 24009353 State Bar No. 0785300 ballen@reynoldsfrizzell.com rgibbs@gibbsbruns.com 1100 Louisiana, Suite 3500 Jennifer Horan Greer Houston, Texas 77002 State Bar No. 00785611 Phone: (713) 485-7200 jgreer@gibbsbruns.com Fax: (713) 485-7520 Sydney G. Ballesteros State Bar No. 24036180 ALEXANDER DUBOSE sballesteros@gibbsbruns.com JEFFERSON & TOWNSEND LLP Michael R. Absmeier Douglas W. Alexander State Bar No. 24050195 State Bar No. 00992350 mabsmeier@gibbsbruns.com dalexander@adtappellate.com Amanda B. Nathan 515 Congress Avenue, Suite 2350 State Bar No. 00784662 Austin, Texas 78701-3562 anathan@gibbsbruns.com Phone: (512) 482-9301 1100 Louisiana, Suite 5300 Fax: (512) 482-9303 Houston, Texas 77002 Phone: (713) 650-8805 Fax: (713) 750-0903

ATTORNEYS FOR APPELLEE, ZACHRY CONSTRUCTION CORPORATION

through agreements as distinct from assignments. 135 S.W.3d at 616; see also Valemas, 2012 WL 2126932, *8-9.

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CERTIFICATE OF SERVICE

I hereby certify that on the 12th day of June, 2015, a copy of the foregoing

instrument was served upon the following counsel by electronically filing with the

Clerk of Court using the TexFile electronic filing system which will send

notification of such filing to the following and via e-mail:

David E. Keltner Marie R. Yeates State Bar No. 11249500 State Bar No. 22150700 david.keltner@kellyhart.com myeates@velaw.com Marianne Auld Catherine B. Smith State Bar No. 01429910 State Bar No. 03319970 marianne.auld@kellyhart.com csmith@velaw.com KELLY HART & HALLMAN LLP VINSON & ELKINS L.L.P. 201 Main Street, Suite 2500 1001 Fannin, Suite 2500 Fort Worth, Texas 76102 Houston, Texas 77002

David H. Brown Michael A. Heidler State Bar No. 03109200 State Bar No. 24059921 dbrown@bkllp.com mheidler@velaw.com BROWN & KORNEGAY LLP VINSON & ELKINS L.L.P. 2777 Allen Parkway, Suite 977 2801 Via Fortuna, Suite 100 Houston, Texas 77019 Austin, Texas 78746

Karen L.T. White Bill Sims State Bar No. 20274500 State Bar No. 18429500 karen@kltwpc.com bsims@velaw.com KAREN L.T. WHITE, P.C. VINSON & ELKINS L.L.P. 2777 Allen Parkway, Suite 977 2001 Ross Avenue, Suite 3700 Houston, Texas 77019 Dallas, Texas 75201

Attorneys for Respondent, The Port of Houston Authority of Harris County, Texas

73

Joe F. Canterbury, Jr. Michael Keeley State Bar No. 03761000 State Bar No. 11157800 jcanterbury@canterburylaw.com michael.keeley@strasburger.com CANTERBURY ELDER GOOCH STRASBURGER & PRICE, LLP SURRATT SHAPIRO & STEIN 901 Main Street, Suite 4400 Occidental Tower Dallas, Texas 75202 5005 LBJ Freeway, Suite 1000 Attorney for Amicus Curiae Zurich Dallas, Texas 75244 Surety Attorneys for Amicus Curiae Associated General Contractors of Texas, Inc.

/s/ Jennifer Horan Greer Jennifer Horan Greer

74

CERTIFICATE OF COMPLIANCE

Pursuant to Texas Rule of Appellate Procedure 9.4(i)(3), I certify that this

brief contains 15,000 words. This word count excludes the words excluded from

the word count pursuant to Texas Rule of Appellate Procedure 9.4(i)(l). This is a

computer-generated document created in Microsoft Word, using 14-point typeface

for all text, except for footnotes, which are in 12-point typeface. In making this

certificate of compliance, I am relying on the word count provided by the software

used to prepare the document.

/s/ Jennifer Horan Greer Jennifer Horan Greer

APPENDIX TO ZACHRY CONSTRUCTION CORPORATION'S SUPPLEMENTAL BRIEF OF APPELLEE

Clerk's Record

1. Final Judgment dated April 28, 2010 (CR62:18163-68)

2. Port of Houston Authority of Harris County v. Zachry Construction Corporation, 377 S.W.3d 841 (Tex. App.—Houston [14th Dist.] 2012), rev’d, 449 S.W.3d 98 (Tex. 2014).

3. Zachry Construction Corporation v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (Tex. 2014).

4. Charge of the Court and Verdict dated January 14, 2010 (CR59:17386-409)

5. Order on Zachry's 11 Part Motion for Pretrial Determination of Issues of Law (Rule 166(g) Motion) dated October 5, 2009 (CR46:13296-309)

6. Order Granting in Part and Denying in Part Plaintiff's Motion to Strike the Port's Offset and Withholding Defenses dated October 16, 2009 (CR51:14948-52)

7. Order on PHA's Request that the Court Reconsider Its November 12, 2009 Open-

the-Door Ruling Regarding the Port's Actual Harms (1SCR6:1112-17)

8. Plaintiff's Fourth Amended Petition and First Amended Answer to PHA's Counterclaim for Attorneys' Fees (CR29:08131-48)

9. Third Amended Original Answer and Counterclaim for Attorneys' Fees (CR45:13008-35)

10. Excerpts from The Port of Houston Authority's Second Amended Response to Plaintiff's Request for Disclosure (CR46:13036-77)

11. The Port of Houston Authority's Objections and Responses to Zachry's Fourth Set of Interrogatories and Fourth Request for Production (CR46:13105-16)

12. Defendant Port of Houston Authority’s Proposed Draft Jury Charge filed September 9, 2007 (CR43:12401-20)

Exhibits

13. Contract, General Conditions (DX1-1.0177-235)

14. Contract, Technical Specifications, Section 02161 Trench Excavation and Shoring Safety Plan (DX1-1.0324-29)

15. Contract, Technical Specifications, Section 01500 Temporary Facilities and Controls (DX1-1.0271-82)

16. Contract, Special Conditions, §12 (DX1-1.0244)

17. Contract, Addendum No. 8 (DX1-1.0021)

18. Email from Thiess to Anderson dated August 1, 2004 (PX84)

19. Acceptance for Records of Main Freeze Wall Plan (PX88)

20. Transcript of April 5, 2005 Meeting (PX8)

21. April 13, 2005 Proposal for Wharf Extension (PX9)

22. May 18, 2009 Proposal for Wharf Extension (PX179)

23. July 11, 2005 Proposal for Wharf Extension and Ditch K (PX219)

24. Request for Port Commission Action for Execution of Change Order 4 Signed by Port Facilities Director James Jackson and Chief Engineer Steve DeWolf with origination date of July 18, 2005 (PX224)

25. September 9, 2005 Frozen Cutoff Wall Design (PX10)

26. Transcript of September 13, 2005 Weekly Construction Coordination Meeting (PX274)

27. Email string between Andy Thiess and Jeff Ely and others dated September 14, 2005 (PX11)

28. Memorandum dated September 14, 2005 from Port Facilities Director Jackson to Port Executive Director Kornegay recommending approval of Change Order 4 (PX3)

29. McQueen email to Thiess dated September 15, 2005 (PX280)

30. Change Order 4 (PX12)

31. Mageau Report on Effect of Freezing and Thawing of Cutoff Wall on Drilled Shafts dated September 28, 2005 (PX14)

32. McQueen email to Ely dated October 10, 2005 (PX1)

33. The Port's October 11, 2005 Response to Zachry's September 9, 2005 Frozen Cutoff Wall Design (PX266)

34. Transcript of October 11, 2005 Weekly Construction Coordination Meeting (PX314)

35. Thiess email to Ely dated November 13, 2005 (PX2)

36. Email string between McQueen, Thiess, Ely, and others dated March 21, 22, and 28, 2007 (PX504)

37. Management Services Agreement (PX643)

38. Pass-through Agreement (PX642)

39. Excerpts from Construction Management Agreement (PX57.0001-10, 57.0033)

Reporter's Record

40. Court’s Ruling on Directed Verdict (71:8-15)

41. Objections to the Charge (71:15-73)

Statutes

42. Texas Local Government Code §271.151 through §271.160 (Vernon 2005)

43. Texas Civil Practices and Remedies Code §16.071

TAB 1

Final Judgment dated April 28, 2010 (CR62:18163-68)

• • P--6 9A DCtZ·I)

CAUSE NO. 2006-72970

ZACHRY CONSTRUCTlON 1\ 'S IN THE DISTR1CT COURT OF CORPORATION nlk/a Zachry Industrial, ~

~~\)

Inc. § § V. ~ \\ HARRTS COUNTY, TEXAS ~ \O(e~:~;

\P~ § PORT OF HOUSTON ~ , %t\)\\\ ~?\\ .

li AUTHORITY OF HARRIS 1\ li COUNTY, TEXAS s 151~

1

JUDICIAL DISTRICT 1"\1(\e·.

FINAL JUDGMENT

On October 20, 2009, this case was called for trial. Plaintiff Zachry Construction ' .

Corporation, now known as Zachry IndustriaL Inc., appeared through its representatives and

through its attorneys and announced ready for trial. Defendant, Port of Houston Authority of

Harris County, Texas, appeared through its representatives and through its attorneys and

announced ready for trial.

After the jury was impaneled and sworn, it heard the evidence and arguments of counsel.

After the close of the defendant's cast und the clost! of ull evidence. Zachry Construction

Corporation moved fo r a directed vcn.lict. The Court or:Jlly b'TOnted a directed verd ict on certain

issues, as stated in open court on January 14, 2009. The Charge of the Court was then submitted

to the jury, and in response, the jury made tindings that the Court received, filed, and entered of

record. The questions submitted to the jury and the jury's findings arc attached as Exhibit A to

Zachry's Motion for Judgment and Mt..,tion to Disregard Jury Findings or for JNOV with Respect

to Certain Jury Findings and im:orporat~d by retcrcnce.

After the verdict, Zachry Constructilm Corporation filed its Motion for Judgment and

Motion to Disregard Jury Findings or for JNOV with Respect to Certain Jury Findings,

speci ficall y asking the Court to disregard th~ jury's answers to Question Nos. 12.A. and 13.

!Si·€2

• • Zachry later filed its Supplemental Motion for Judgment and to Disregard Certain Jury Findings,

specifically asking the Court to also disregard the jury's answers to Question Nos. 4 and 9, and

to disregard Question No. 5 as a basis for reducing Zachry's damages.

While the parties have extensively briefed myriad issues after the jury rendered its

verdict. the Court wishes to write briefly on the cent ral issue on which Defendant Port of .

Houston Authority seems to havt focused, so\'creign immunity: The Court has carefully

considered the authority that the parti es presented (m this issue. The Court is not persuaded that

Texas Jaw precludes an award to Plaintiff Zachry Construction Corporation for the damages

found by the jury. The Court has read and considered. among many other cases, Tooke v. City of

Mexia, 197 S.W.3d 325 (Tex.. 2006), McKinney & Moore, Inc. \'. City of Longview, No. 14-08-

00628-CV, 2009 WL 4577348 (Tex. App. ··-Houston ll4'h Dist.] Dec.' 8, 2009, pet. fi led), and . -

Ciry of 1/ousron v. Southern Electri<.: Sen·ices, 273 S. W.3d 739 (Tex.. App.- Houston [I 51 Dist.]

2008, pet. denied). .

The last case, Sourhern Electric. providcs guidance for the Court. The Court understands

- that the case involved a plt:a to the jurisdiction. id. at 744. and that the current matter docs not.

Nevertheless, the court in Sorahern Electric was still squarely tuced with the question of whether

a pleading of damages that were not c:<prl·ssly contemplated by the contract at issue, but were

instead, clear~v owsidc of the contract, deprived th~ trial court of j urisdiction as being outside of

the damages permitted in section 271.153. Jd. The court in Sou/hem Eleclric seems to have

understood what it was dealing with. and could easily have concluded that the pleading of the

damages for increased costs to perform the contract. which was unquestionably outside of 1he

four comers of the contract, id.. ueprivt!d the trial court of jurisdiction. The court did not, and

instead essentiall y found section 271.153 to be a mcrc limitation on damages (and it was

2

/

• published after the Supreme Court's opinion in Tooke) . Id.

• Indeed, the court in Southern

Electric seems to have held that by pleading tor damages that were clearly outside the express

terms of the contract, the plaintiff in that case nevertheless had "alleg[ed] facts to support their

claim that the City has not paid the balance due and owed under the contract." !d. (internal

quotations omitted). Finally, contrary to the Defendant Pon of' Houston Authority's arguments.

both Southern Electric, 273 S.W.3d at 744, and Cit,v u,(Mesquite v. PKG Contracting, Inc., 263

S.W.3d 444, 448 (Tex. App.-Dallas 2008, no pet.) (both written after Tooke) seem to conclude

that section 271.153 is not jurisdictional. but merely a limitation on damages.

In the end, the Court is unwilling to find that the "balance due and owed" language in

271.153 et seq. requires that the types of damages that a contractor sues for after an alleged

- breach of contract by tht:: owner have to be expressly li sted in the contract. The Co.urt believes

that despite Defendant Port of Houston Authority's excellent briefing and arguments to the

contrary, such a finding would likely lead to absurd results. The Court can imagine contracts

expanding to include hundreds of pages of boilerplate and surplussage, drafted by battalions of

lawyers (not that the Court ~as anything against lawyers). that no one reads just to cover any ·

possible contingency, and any permutation or derivation of any such contingency. If that were

so, and if Mr. Nixon's statements in the legislative history really carried the day, then such

language could have easily been includt:d in section 271.153. It was not.

The Court believes that it understands and appreciates Defendant Port of Houston

Authority's position that the limitation on damages contained in Texas Local Gov't Code section

271 .153 et seq. is part of the limited waiver of sovc:reign immunity and thus those provisions

should be construed narro,vly. The bottom line is that. whether that position is correct or not, the

Court docs not find that this issue to be dispositive. The Court's \'iew is that the answer is in the

4

.. • • language of sections 271 .153(a)(l) and (2). That is, the Court tinds that the damages arc direct

damages and constitute (a) the balance due and owed by the local governmental entity under the

contract as it may have been amended, including any amount owed as compensation for the

increased cost to perfonn the work as a direct result of owner-caused delays or accelera~ion; or

(2) the amount owed for change orders or additional work the contractor is directed to pcrfonn

by a local governmental entity in connection with the contract, or both. That is true whether the

section is interpreted narrowly or broadly. 1

The Court has considered Zachry Construction Corporation's motions, the Port's Motions

for JNOV, the parties responses, as well as the parties replies and sur-replies, the record in this

matter, and the jury verdict, and RENDERS jud~:,rment t{lr Zachry Construction Corporation and

against the Port of Houston Authority of Harris County. Texas, us follows:

(I) lt is ORDERED. ADJUDGED, AND DECREED that Zachry Construction

Corporation recover damages from the Port of Houston Authority of Harris County, Texas in the

sum of$19,992,697.00, which was dctennined by subtracting the jury's award of$970,000.00 in

offset damages in its answer to Question 12(A) from the other amounts awarded to Plaintiff

Zachry Construction Corporation. Further, the Court has not awarded the $600,000 withheld for

dredging work that the jury refused to award to Plaintiff;

(2) lt is further ORDERED, ADJUDGED, AND DECREED that Zat:hry

Construction Corporation recover from the Defendant Port of Houston Authority of Harri$

County, Texas prejudgment interest on that sum in the amount of $3,451 ,022.40, which is

1 The Coun is also not persuaded that any narrow reading of se~:ti on 271 .153 relates to the continued existence of common law exceptions to the no-damages-for-dday clause in the Wharf :md Dredging Contract. This Court has repeatedly held in this cose that thoSI! provisions are part ofTt'xas law. And, section 271.151 et seq. does not c~pressly eliminat~ these dcfcn!les. lnd~ed, section 271 .155 would sel:'m to defeat the Port's argument that such defenses no longer exist. Of course the kgislature was aware of tho: I:'Xi~tent'e of these defenses in Texas case law. afld could have easily addressed them in the statutory st'heme.

• • determined by taking the a•..vard of actual damages of S\9,992,697 .00, and calculating an annual

rate of interest of 5% from November 15. 2006 through the day before the entry of judgment.

April28, 2010. The total ofthcsc two ligures is $23.443.719.00;

(3) ll is ORDERED. ADJUDGED. AND DECREED that Zachry Construction

Corporation recover from the Port of Houston Authority of Harris County, Texas postjudgment

interest from the date of this Final Judgment on the total sum awarded of $23,443,719.00, at the

rate of 5% per a·nnum, compounded annually: and

(4) It is ORDERED, ADJUDGED, AND DECREED that Zachry Construction

Corporation recover all ta,able costs of court from the Port of Houston Authority.

The Court ORDERS, ADJUDGES, AND DECREES that execution shall issue for this

judgment, and that Zachry Construction Corporation is b'Tanted all writs and processes necessary

to enforce this final judgment.

All relief not expressly granted herein is DENIED.

This judgment is final. disposes of all parties, und is appealable.

API< 2 8 2010 I

I

Signed this day of April, 2010.

The Honorable Mike Engelhart

5

'·

!81S7

APPROVED AS TO FORM:

• • '

GIBBS & BRUNS. LLP

BY: lsi Jennifer Horan Greer Robin C. Gibbs State Bar No. 07853000 Jennifer Horan Greer Texas Bar No. 0078561 1 Sydney G. Ballesteros Texas Bar No. 24036180 Michael R. Absmeicr State Bar No. 24050195 II 00 Louisiana, Suite 5300 Houston, Texas 77002 Phone: (713) 650-8805 Fax: (713)750-0903

REYNOLDS , FRIZZELL. BLACK. DOYLE, ALLEN & O~DHAM L. L.P.

Brandon T. Allen State Bar No. 24009353 II 00 Louisiana, Suite 3500 Houston, Texas 77002 Phone (713) 485-7200 Fax (713) 456-2651

AITORNEYS FOR PLAINTIFF

TAB 2

Port of Houston Authority of Harris County v.

Zachry Construction Corporation, 377 S.W.3d 841 (Tex. App.—Houston [14th Dist.] 2012), rev’d, 449 S.W.3d 98 (Tex. 2014).

Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)

377 S.W.3d 841 Court of Appeals of Texas, Houston (14th Dist.).

The PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY, Texas, Appellant v.

ZACHRY CONSTRUCTION CORPORATION, Appellee.

No. 14–10–00708–CV. | Aug. 9, 2012.

Synopsis Background: Construction contractor brought action against county port authority for breach of contract. The 151st District Court, Harris County, No.2006–72970, Mike Engelhart, J., entered judgment on jury verdict for contractor. Port authority appealed.

Holdings: The Houston Court of Appeals, Sharon McCally, J., held that: [1]

no-damages-for-delay clause barred damages for active interference or bad faith;

[2]

contractor released claims to recover withheld funds;

[3]

evidence supported finding that contractor breached contract as to epoxy coating of fenders; and [4]

port authority was not required to establish that its expenditure to repair fenders was reasonable.

Reversed.

Tracy Christopher, J., filed dissenting opinion.

West Headnotes (26)

[1]

Contracts Intention of Parties

The court’s primary concern when it construes a written contract is to ascertain the parties’ true intent as expressed in the contract.

Cases that cite this headnote

[2]

Contracts Construction as a whole

Courts must examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 1

Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)

a contract so that none will be rendered meaningless.

Cases that cite this headnote

[3]

Appeal and Error Cases Triable in Appellate Court

The construction of an unambiguous contract is a question of law for the court, which is reviewed de novo.

Cases that cite this headnote

[4]

Public Contracts Delay of government and liability for damages Water Law Contracts

No-damages-for-delay clause of county port authority’s contract with construction company to build wharf barred construction company from recovering damages on its breach of contract claim against port authority for delaying or hindering construction, even if port’s conduct constituted arbitrary and capricious conduct, active interference, bad faith, and fraud, where the clause covered “other fault” in addition to negligence and breach of contract, and the clause provided for extension of time as a remedy.

Cases that cite this headnote

[5]

Contracts Freedom of contract Contracts Public Policy in General

Parties are free to contract as they see fit, as long as their agreement does not contravene public policy.

Cases that cite this headnote

[6]

Contracts Rewriting, remaking, or revising contract

Courts do not rewrite contracts to insert provisions parties could have included or imply restraints for which they have not bargained.

Cases that cite this headnote

[7]

Contracts Freedom of contract

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 2

Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)

The parties are entitled to select what terms and provisions to include in a contract before executing it and, in so choosing, each is entitled to rely upon the words selected to demarcate their respective obligations and rights.

Cases that cite this headnote

[8]

Release Nature and requisites in general

A “release” is a writing that provides that a duty or obligation owed to one party to the release is discharged immediately or upon the occurrence of a condition.

1 Cases that cite this headnote

[9]

Release General rules of construction

Releases are subject to the usual rules of contract construction.

Cases that cite this headnote

[10]

Release General rules of construction

As in other instances of contract construction, the court’s primary concern in interpreting a release is to ascertain the intent of the parties at the time of the execution of the alleged release as expressed in the release.

1 Cases that cite this headnote

[11]

Release General rules of construction

To construe a release, courts may examine evidence of the circumstances surrounding the negotiation and execution of the release.

1 Cases that cite this headnote

[12]

Release General rules of construction

To construe a release, courts may consider the deletions made by the parties in the course of drafting the instrument

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 3

Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)

at issue.

Cases that cite this headnote

[13]

Release General rules of construction

To construe a release, courts may consider the title of the document, but such is not dispositive.

Cases that cite this headnote

[14]

Release Scope and extent in general

For a release to be effective, it must mention the claim to be released, but the release need not specifically describe a particular cause of action.

Cases that cite this headnote

[15]

Release General rules of construction Release General release

Even where the parties’ agreement does not contain the term “release,” the intent of the parties controls, and the legal effect of the instrument may be a general release.

Cases that cite this headnote

[16]

Release Release of damages for breach of contract

Documents titled “Partial Release of Lien” were releases of construction contractor’s claims against project owner for the entire amounts stated on payment estimates submitted with monthly invoices, even though the body of the documents contained neither the word “release” nor the word “lien,” and even though general release language that appeared in an earlier version of the document was omitted from the documents at issue, where the documents stated that contractor “has no further claims against” project owner “for the portion of the Work completed and listed on the Schedule of Costs” in the respective payment estimates.

Cases that cite this headnote

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 4

Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)

[17]

Release General release

A broad, general release releases every potential cause of action pertaining to the subject matter.

Cases that cite this headnote

[18]

Release Scope and extent in general

Texas law requires identification of the claim to be released, not quantification.

Cases that cite this headnote

[19]

Appeal and Error Total failure of proof

Court of Appeals may not sustain a legal sufficiency, or “no evidence” point unless the record demonstrates that: (1) there is a complete absence of a vital fact; (2) the court is barred by the rules of law or evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence to prove a vital fact is no more than a scintilla; or (4) the evidence conclusively establishes the opposite of the vital fact.

2 Cases that cite this headnote

[20]

Public Contracts Evidence Water Law Contracts

Evidence that thickness tests conducted on wharf fenders indicated that the layer of epoxy coating was much thicker than specified by the construction contract presented “some evidence” supporting jury’s finding that construction contractor breached its contract with county port authority.

Cases that cite this headnote

[21]

Public Contracts Evidence Water Law Contracts

Engineer’s report stating that a layer of epoxy coating failed to penetrate into wharf fenders’ porous metalized aluminum substrate because the layer was insufficiently thinned, and that the fenders corroded as a result, presented “some evidence” supporting jury’s finding that construction contractor’s breach of a contract with county port authority that specified the thickness of the coating compromised the sealing of porosity and directly caused the fenders’ corrosion.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 5

Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)

Cases that cite this headnote

[22]

Public Contracts Damages and amount of recovery Water Law Contracts

Port authority was not required to establish that its expenditure of $978,000 to repair wharf fenders that corroded due to construction contractor’s breach of contract reflected the “reasonable and necessary” cost to repair the fenders, where the contract itself did not require that the loss be “reasonable and necessary” for recovery.

Cases that cite this headnote

[23]

Pretrial Procedure Facts taken as established or denial precluded; preclusion of evidence or witness

Trial court did not abuse its discretion in ruling that billing attorney’s testimony about document production was not expert testimony, in allowing the testimony on the issue of an attorney fee award despite the fact that attorney had not been designated as an expert.

Cases that cite this headnote

[24]

Costs Items and amount; hours; rate

Guidelines applicable to an attorney fee award are: (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly; (2) the likelihood that the acceptance of the particular employment will preclude other employment; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered.

Cases that cite this headnote

[25]

Appeal and Error Fees

Contractor did not waive its challenge on appeal to factual sufficiency of evidence supporting attorney fee award, in allegedly waiving challenges to attorney fees expert’s methodology.

Cases that cite this headnote

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 6

Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)

[26]

Costs Contracts

Factually sufficient evidence supported attorney fee award of over $10 million in attorney fees to county port authority to defend contractor’s $30 million claims, including evidence that, rather than providing copies of responsive documents to port authority, contractor asked the port authority’s attorneys to perform document review at an un-air conditioned, metal container facility, and that the facility was “crammed full of boxes not organized in any manner.”

Cases that cite this headnote

Attorneys and Law Firms

*843 David E. Keltner, Fort Worth, TX, Marie R. Yeates, Houston, TX, for Appellant.

Jennifer Horan Greer, Robin C. Gibbs, Houston, TX, for Appellee.

Panel consists of Justices BOYCE, CHRISTOPHER, and McCALLY.

*844 MAJORITY OPINION

SHARON McCALLY, Justice.

Zachry Construction Corporation (Zachry) sued the Port of Houston Authority of Harris County, Texas (the Port) for breach of contract arising from the Bayport Terminal Complex Phase 1A Wharf and Dredging Contract. Following a three-month jury trial, the trial court entered a final judgment, awarding Zachry damages in the amount $19,992,697, plus pre- and post-judgment interest. The Port appeals the final judgment in eleven issues. Zachry also brings three issue on cross-appeal. We reverse and render.

I. BACKGROUND

In 2003, the Port solicited bids to construct a wharf at the Bayport Ship Channel. The wharf consisted of five sections, each approximately 330 feet in length. Zachry’s bid proposed building the wharf “in the dry” by using a U-shaped, frozen earthen wall to seal out water from Galveston Bay from the construction site. Zachry proposed to freeze the wall by sinking 100–foot pipes into the wall and circulating chilled brine through the pipes. Then, Zachry would install drilled shafts into the ground, pour a concrete deck on top of the drilled shafts and dirt using the ground as the bottom of the concrete form, excavate the dirt under the deck, and place revetment to stabilize the slope. After completing the wharf, Zachry would breach the freeze wall, flooding the area, and remove the remainder of the freeze wall so that ships would be able to dock at the wharf and unload their cargo.

An advantage of working “in the dry” instead of “in the wet” is that fewer “NOx” emission credits would be consumed. The Port accepted Zachry’s bid because of the environmental benefits of using the freeze wall. On June 1, 2004, Zachry entered into the Bayport Phase 1A Wharf and Dredging Contract with the Port for the construction of a 1,660–foot wharf. The Port

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 7

Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)

had concerns about the possible impact of the frozen soil on adjacent structures but provided in the contract that Zachry would control the means and methods. Zachry hired RKK–SoilFreeze Technologies, which, in turn, hired Dan Mageau of GeoEngineers, a geotechnical engineer, to design the freeze wall.

The contract also provided a strict timeline. Specifically, Zachry was to complete construction of the wharf by June 1, 2006. Zachry was also to meet an interim deadline of February 1, 2006—Milestone A—by which a portion of the wharf would be sufficiently complete to allow delivery of large ship-to-shore cranes that were to be shipped from China. The contract also provided that Zachry’s sole remedy for any delay on the project was an extension of time.

In March 2005, the Port decided to extend the original wharf Zachry was constructing by 332 feet. Zachry submitted price quotes for the wharf extension on April 13, May 18, and July 11. The Port and Zachry executed Change Order 4 for the wharf extension on September 27, 2005. Change Order 4 extended the dates for Milestone A to February 15, 2006, and final completion to July 15, 2006.

From Zachry’s perspective, Change Order 4 incorporated the April 13 proposal as further modified by the May 18 and July 11 proposals. So, Zachry had Mageau design a frozen cutoff wall (frozen COW), a perpendicular wall to the main freeze wall, to split the project into two phases: a west side including Area A, and an east side. Zachry sent that September 9, 2005 frozen COW design to the Port for “review,” not “approval.” Zachry believed it had the right to use the frozen cutoff wall and to do so with “uninterrupted work process.”

*845 From the Port’s perspective, Zachry’s September 9, 2005 frozen cutoff wall design was subject to a contractual technical specification that provided the Port with the right to respond. Because the contract specifically provided the Port a right to respond with a “revise and resubmit” (R & R), and because the Port had serious concerns about the design, that is precisely what it did. The Port provided its R & R response that (1) noted preliminary indications that the design may have an indeterminate effect on up to 14 shafts, (2) directed Zachry either to “present [an] alternative cutoff wall design” or to “present the Port of Houston with an alternate means of mitigating risk” to the shafts, and (3) allowed Zachry to use the frozen COW design if the shafts were protected.

Ultimately, in late November 2005, Zachry abandoned the frozen COW and switched to an “in the wet” scenario. The Port urges the course was Zachry’s voluntary change in recognition that the freeze wall was “killing the schedule.” Zachry urges that it was due to the Port’s rejection of the frozen COW (Zachry’s means and methods) and unwillingness to depart from the contract deadlines.

In May 2006, the Port notified Zachry that, due to Zachry’s delay, the Port would begin withholding liquidated damages from payments on Zachry’s monthly invoices. After withholding $2.36 million in liquidated damages, the Port voluntarily stopped withholding liquidated damages.

In late 2006, Zachry sued the Port for breach of contract, i.e., the R & R response, by failing to comply with Change Order 4 and section 5.10 of the contract, for the difference between the cost that Zachry would have incurred had it been allowed to complete the wharf “in the dry,” i.e., using the frozen cutoff wall, and the actual cost Zachry incurred in completing the wharf “in the wet,” i.e., without the frozen cutoff wall. Zachry also sued the Port for withholding liquidated damages for delays in the amount of $2.36 million, and for the Port’s withholding of $600,000 as a purported offset for alleged defective dredging under Change Order 1. The Port filed a counterclaim for attorney’s fees under section 3.10 of the contract, which provides that Zachry is liable for the Port’s attorney’s fees if Zachry brings a “claim” against the Port and “does not prevail with respect to such claim.” Over two years after suing the Port, Zachry declared the wharf complete on January 26, 2009.

After a three-month trial, the case was submitted to the jury. The jury found that the Port had breached the contract by failing to comply with Change Order 4 and section 5.10, and found compensatory damages in the amount of $18,602,697 for the Port’s breach of the contract. These damages represented Zachry’s increased costs for switching to working in the “wet.” The jury found that 58.13% of those damages were for delay or hindrance.

The jury did not find that the Port failed to comply with the contract by withholding $600,000 from the Port’s payment on the amounts invoiced by Zachry for defective dredging.

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The trial court instructed the jury that the Port had failed to comply with the contract by failing to pay Zachry $2.36 million withheld as liquidated damages. Thus, the jury needed only to determine whether the Port was entitled to offset; the jury found for the Port on the offset defense in the amount of $970,000 for Zachry’s defective work on the Wharf fenders.

The jury found reasonable attorney’s fees for the Port with respect to Zachry’s claim relating to Change Order 4 and/or section 5.10: (1) $10,500,000 for trial; (2) *846 $90,000 for appeal to the court of appeals; and (3) $22,500 for appeal to the Texas Supreme Court. The jury found reasonable attorney’s fees for the Port as to Zachry’s claim for withholding the $2.36 million as liquidated damages and the $600,000 for dredging: (1) $80,250 for trial; (2) $3,750 for appeal to the court of appeals; and (3) $1,250 for appeal to the Texas Supreme Court.

In its final judgment, the trial court awarded Zachry damages in the amount of $19,992,697—$18,602,697 plus $2.36 million in liquidated damages, less the $970,000 offset for the defective fenders, pre-judgment interest in the amount of $3,451,022.40, post-judgment interest on the total sum award of $23,443,719, and taxable costs. The trial court did not award the $600,000 withheld for defective dredging that the jury refused to award to Zachry. The trial court did not award attorney’s fees to the Port.

In this appeal, the Port claims that the evidence is legally and factually insufficient to support the jury’s findings on breach, causation, and damages; governmental immunity bars Zachry’s claim for R & R damages; the no-damages-for-delay clause bars Zachry’s delay damages; Zachry’s failure to obtain a change order bars its recovery of R & R damages; Zachry’s failure to provide written notice of a breach bars its R & R damages; governmental immunity bars Zachry’s “pass-through” claim damages incurred by its subcontractor; the trial court abused its discretion by excluding evidence of the Port’s harms and losses; the Port’s failure to comply with the contract by withholding liquidated damages was excused by release, as a matter of law; the trial court erred by instructing the jury on apparent authority; and the Port is entitled to attorney’s fees.

In its cross-appeal, Zachry claims it is entitled to judgment, as a matter of law, for the $600,000 the Port withheld for defective dredging; the evidence is legally and factually insufficient to support to support the jury’s findings that the Port did not fail to comply with the contract with respect to the fenders; and the evidence is factually insufficient to support the jury’s findings on the amount of the Port’s attorney’s fees.

II. ANALYSIS

A. No–Damages–for–Delay Clause

Because we find the Port’s Issue 4A dispositive of the award of R & R damages, we address it first. In Issue 4A, the Port contends that section 5.07’s no-damages-for-delay clause bars Zachry’s R & R damages. Specifically, the Port complains that the trial court erred by applying a common-law, tort-like “exception” to the contract’s no-damages-for-delay clause. Section 5.07—the contract’s no-damages-for-delay clause—provides:

The Contractor shall receive no financial compensation for delay or hindrance of the Work. In no event shall the Port Authority be liable to the Contractor or any Subcontractor or Supplier, any other person or any surety for or any employee or agent of any of them, for any damages arising out of or associated with any delay or hindrance to the Work, regardless of the source of the delay or hindrance, including events of Force Majeure, AND EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM, ARISES OUT OF OR IS DUE, IN WHOLE OR IN PART, TO THE NEGLIGENCE, BREACH OF CONTRACT OR OTHER FAULT OF THE PORT AUTHORITY. The Contractor’s sole remedy in any such case shall be an extension of time.

*847 Question No. 3 asked the jury: “What sum of money, if any, if paid now in cash, would fairly compensate Zachry for its damages, if any, that resulted from the Port’s failure to comply?” Relevant to this issue, the trial court instructed the jury that the contract’s no-damages-for-delay provision precluded Zachry’s R & R damages for delay or hindrance unless the jury

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found that such damages resulted from the Port’s “arbitrary and capricious conduct, active interference, bad faith and/or fraud.”1 The jury found R & R damages in the amount of $18,602,697.

1 In Question No. 3, the trial court instructed the jury as follows with respect to section 5.07:

You are instructed that § 5.07 of the Contract precludes Zachry from recovering delay or hindrance damages, if any, unless you find that the delay or hindrance damages, if any, resulted from a delay or hindrance that was the result of the Port’s actions, if any, that constituted arbitrary and capricious conduct, active interference, bad faith and/or fraud.

Question No. 4 asked the jury: “What percentage of the damages that you found in your answer to Question No. 3 was for delay or hindrance damages?” The jury found 58.13% of Zachry’s R & R damages resulted from delay or hindrance. However, in an agreed motion, the Port and Zachry asked the trial court to disregard the jury’s finding that 58.13% of such damages were the result of delay or hindrance because such finding was not supported by legally and factually evidence and, instead, asked the trial court to find that the evidence conclusively established, as a matter of law, that the answer to Question No. 4 is 100%. The trial court entered an agreed order disregarding the jury’s answer of 58.13% to Question No. 4 and found that it was conclusively established, as a matter of law, that the answer to Question No. 4 is 100%.

Our primary concern when we construe a written contract is to ascertain the parties’ true intent as expressed in the [1] [2] [3]

contract. In re Serv. Corp. Int’l, 355 S.W.3d 655, 661 (Tex.2011) (per curiam) (orig. proceeding); Epps v. Fowler, 351 S.W.3d 862, 865 (Tex.2011). “We must examine and consider the entire writing ‘in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.’ ” Grohman v. Kahlig, 318 S.W.3d 882, 887 (Tex.2010) (per curiam) (quoting Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 662 (Tex.2005)). “We begin this analysis with the contract’s express language.” Italian Cowboy Partners, Ltd. v. Prudential Ins. Co. of Am., 341 S.W.3d 323, 333 (Tex.2011). The construction of an unambiguous contract is a question of law for the court, which we consider under a de novo standard of review. Tawes v. Barnes, 340 S.W.3d 419, 425 (Tex.2011); see also Exxon Corp. v. Emerald Oil & Gas Co., L.C., 348 S.W.3d 194, 214 (Tex.2011) (op. on reh’g) (“Where an ambiguity has not been raised by the parties, the interpretation of a contract is a question of law.”).

Zachry alleged that it suffered delay or hindrance damages on the project attributable to conduct by the Port, and the jury agreed. We have long recognized that “[i]n the absence of provision to the contrary, a contractor ... is entitled to recover damages from a contractee ... for losses due to delay and hindrance of work if it proves (1) that its work was delayed or hindered, (2) that it suffered damages because of the delay or hindrance, and (3) that the contractee was responsible for the act or omission which caused the delay or hindrance.” *848 City of Houston v. R.F. Ball Constr. Co., 570 S.W.2d 75, 77 (Tex.Civ.App.-Houston [14th Dist.] 1978, writ ref’d n.r.e.) (citing Anderson Dev. Corp. v. Coastal States Crude Gathering Co., 543 S.W.2d 402 (Tex.Civ.App.-Houston [14th Dist.] 1976, writ ref’d n.r.e.)).

The Port of Houston alleged that section 5.07 is a “provision to the contrary.” The trial court rejected the Port’s construction of section 5.07 as a blanket prohibition of delay damages. Instead, through its instruction in Question No. 3, the trial court determined, as a matter of law, that the Port could not enforce section 5.07 to preclude delay or hindrance damages resulting from any action by the Port that constituted arbitrary and capricious conduct, active interference, bad faith, or fraud.

Inasmuch as the delay damages constitute 100% of the damages awarded, a threshold question this court must resolve on appeal is whether the damage award is tainted because the trial court misinterpreted the contract and engrafted common-law exceptions onto the contractual no-damages-for-delay provision.

Generally, courts of many other jurisdictions give only a “restrained approval” of no-damages-for-delay provisions because of their harshness. See Maurice T. Brunner, Annotation, Validity and Constructions of “No Damage Clause” with Respect to Delay in Building or Construction Contract, 74 A.L.R.3d 187, 201 (1976). Those courts, again generally, construe the provisions strictly against the owner/drafter. Id. It is this strict construction that formed the genesis for common-law exceptions to the no-damages-for-delay clause.

It is undisputed that the Texas Supreme Court has not resolved whether Texas recognizes these exceptions. See Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 387–88 (Tex.1997) (“Assuming that these ... exceptions preclude the enforcement of no-damages-for-delay clauses, these exceptions have not been established in this case.”). However, this court is not facing the

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application of common-law exceptions to a no-damages-for-delay clause for the first time. See R.F. Ball Constr. Co., 570 S.W.2d at 77–78. Because the parties dispute the application of our precedent,2 we explore it in depth.

2 The Port states that “[t]his Court did not hold in R.F. Ball that Texas recognizes common law ‘exceptions.’ ” On the other hand, citing R.F. Ball, among others, Zachry states that “Texas courts have repeatedly recognized and applied the [no-damages-for-delay] exceptions.”

In R.F. Ball, the City of Houston appealed a judgment in favor of its contractor arising from the construction of portions of the Houston Intercontinental Airport. Id. at 76. Ball was scheduled to complete the project on April 30, 1967, but did not do so until June 9, 1969. During the project, Ball faced “several hundred ‘Change Items’ and between eight hundred and nine hundred ‘Clarifications.’ ” Id. The City paid direct costs associated with these changes, but did not pay indirect or impact costs associated with the changes. Id. The types of indirect costs included disruption to the project and “general hindrance of efficient work which inevitably resulted from the changes.” Id.

After a two-month trial, the jury awarded substantial damages to Ball and specifically found inter alia that (1) the number of changes was greater than foreseen by the parties; (2) the unforeseen changes caused Ball’s delay; and (3) such delay was not foreseen when the parties entered into the contract. Id.

Thus, on appeal, this court faced these jury findings and a no-damages-for-delay clause that provided, in pertinent part:

The Contractor shall receive no compensation for delays or hindrances to the *849 work, except when direct and unavoidable extra cost to the Contractor is caused by the failure of the City to provide information or material, if any, which is to be furnished by the City.... If delay is caused by specific orders given by the Engineers to stop work, or by the performance of extra work, or by the failure of the City to provide material or necessary instructions for carrying on the work, then such delay will entitle the Contractor to an equivalent extension of time ....

Id. at 77.

As a starting point, and citing to other jurisdictions, this court acknowledged that “one of the exceptions to the application of a [no-damages-for-delay] provision is that a delay which was not intended or contemplated by the parties to be within the purview of the provision is not governed by it.” Id. (citing Ace Stone, Inc. v. Twp. of Wayne, 47 N.J. 431, 435, 221 A.2d 515 (1966); W. Eng’rs, Inc. v. State Rd. Comm’n, 20 Utah 2d 294, 296, 437 P.2d 216 (1968)). Referring again to other jurisdictions, we also noted three additional generally recognized exceptions to enforcement of no-damages-for-delay clauses.3

3 The additional exceptions we mentioned are: (1) delay resulting from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision; (2) delay that has extended such an unreasonable length of time that the party delayed would have been justified in abandoning the contract; and (3) delay not within the specifically enumerated delays to which the no-damages-for-delay clause applies. R.F. Ball Constr. Co., 570 S.W.2d at 77 n. 1 (citing W. Eng’rs, Inc., 20 Utah 2d at 296, 437 P.2d 216).

With this background, we examined the intent of the parties arising from the specific language of the contract. Significantly, we specifically rejected Ball’s line of cases that held that “if the delays or their cause were beyond the contemplation of the parties, then the [no-damages-for-delay] clause does not apply.” Id. at 78 n. 2 (“We disagree with such cases since they preclude operation of the clause in situations where the character of the delay was unforeseen[,] the precise sort of delays the clause is designed to cover.”). Ball obtained specific jury findings that the delay it occasioned fell directly within the common-law exception upon which it relied. Id. at 77–78. Nonetheless, we determined that, because the no-damages-for-delay clause was unambiguous and did not limit its application to foreseen delays, Ball could not establish a right to compensation for the indirect costs of the delay. Id. at 78.

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Finally, we specifically addressed the policy underlying some courts’ rejection or restriction of no-damages-for-delay clauses: such provisions are very harsh. Id. Nevertheless, relying explicitly on the “instructive” language of the United States Supreme Court, we explained:

“Men who take $1,000,000 contracts for government buildings are neither unsophisticated nor careless. Inexperience and inattention are more likely to be found in other parties to such contracts than the contractors, and the presumption is obvious and strong that the men signing such a contract as we have here protected themselves against such delays as are complained of by the higher price exacted for the work.”

Id. (quoting Wells Bros. Co. v. United States, 254 U.S. 83, 87, 41 S.Ct. 34, 65 L.Ed. 148 (1920)).

Thus, in R.F. Ball, we noted that the common-law exceptions to no-damages-for-delay provisions are “generally recognized” and, further, we analyzed one of the exceptions—that the “delay which was not intended or contemplated by the parties to be within the purview of the provision.” *850 Id. at 77. However, we did not apply the exception because the contractor “ha[d] not established that the [no-damages-for-delay] clause was not intended to apply to unforeseen delays and hindrances and that it was only intended to apply to foreseeable ones.” Id. at 78.

Here, the exceptions applied by the trial court addressed: “delay or hindrance that was the result of the Port’s actions, if any, that constituted arbitrary and capricious conduct, active interference, bad faith and/or fraud.” Under R.F. Ball, then, we must determine whether Zachry established that the no-damages-for-delay clause at issue was not intended to apply to delay or hindrance that was the result of the Port’s actions. The plain language of the pertinent portion of the provision is as follows: “arising out of or associated with any delay or hindrance to the Work, regardless of the source of the delay or hindrance including events of Force Majeure, AND EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM, ARISES OUT OF OR IS DUE, IN WHOLE OR IN PART, TO THE NEGLIGENCE, BREACH OF CONTRACT OR OTHER FAULT OF THE PORT AUTHORITY.” Thus, the parties’ agreement states there are no damages for delay “regardless of the source.”

Further, though the parties had already stated that the source of the delay was immaterial, they gave emphasis to their intent that delay due even in part to conduct by the Port was something they were specifically contemplating. And, as if specific mention might be insufficient, the parties typed the matters regarding conduct by the Port in all capital letters, which set it apart from the remainder of the paragraph. Finally, to give utmost emphasis, the parties described three categories of fault: (1) negligence, (2) breach of contract; or (3) other fault. [4]

We know that the delay or hindrance damages were caused, at least in part, by breach of contract. By its response to Question Nos. 1 and 2, the jury determined that the Port breached the contract—both Change Order 4 and section 5.10 of the contract. The jury answered Question No. 3 by finding damages “that resulted from” the breach in the amount of $18,602,697. By the parties’ agreement regarding Question No. 4, the evidence conclusively established that 100% of those damages are delay or hindrance damages. Thus, 100% of the delay or hindrance suffered by Zachry resulted from the conduct of the Port, that is, breach of contract. In accord with R.F. Ball, we conclude that Zachry has failed to establish that the no-damages-for-delay clause was not intended to apply to the Port’s breach of contract.

The jury was not asked to make a specific finding on whether the Port’s conduct “constituted arbitrary and capricious conduct, active interference, bad faith and/or fraud.” However, we conclude that even a specific jury finding would not interfere with the application of the no-damages-for-delay clause in this case. By the parties’ emphasis on “other fault” to the specific exclusion of “negligence,” the parties have communicated their intent that Port conduct that rises above mere negligence or is a departure from the standard of care does not preclude enforcement of the no-damages-for-delay clause. Again, in keeping with R.F. Ball, we conclude that Zachry has failed to establish that the no-damages-for-delay clause was not intended to apply to Port conduct including, arbitrary and capricious conduct, active interference, bad faith, or fraud.

As harsh as this result seems, Texas law respects the objective intent of the parties where contract provisions show that the parties contemplated delay when entering *851 into the contract. See United States ex rel. Straus Sys., Inc. v. Associated Indem. Co., 969 F.2d 83, 85 (5th Cir.1992) (citing R.F. Ball Constr. Co., 570 S.W.2d at 77). Here, the parties clearly contemplated that delay, even due to the Port’s conduct, was a possibility and negotiated accordingly. Moreover, parties to a contract might foresee or consider the possibility of delay and contractually provide for a remedy to be applied upon such

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occurrence. Id. (citing R.F. Ball Constr. Co., 570 S.W.2d at 77). Here, the parties did just that by agreeing that, in case of delay, Zachry’s “sole remedy in any such case shall be an extension of time.” We need not go so far as to hold, as some courts of other jurisdictions do, that because the parties provided a remedy for delay, such remedy is the exclusive remedy. See id. (noting courts that hold a provision in the contract for an extension of time in a case of delay amounts to an exclusive remedy, precluding recovery of damages from the contractor).

“[T]he parties are free to contract as they see fit, as long as their agreement does not contravene public policy.” Tex.

[5] [6] [7]

State Bd. of Med. Examiners v. Birenbaum, 891 S.W.2d 333, 336 (Tex.App.-Austin 1995, writ denied) (citing Scoville v. SpringPark Homeowner’s Ass’n, Inc., 784 S.W.2d 498, 502 (Tex.App.-Dallas 1990 writ denied)). Courts do not rewrite contracts to insert provisions parties could have included or imply restraints for which they have not bargained. Tenneco, Inc. v. Enter. Prods. Co., 925 S.W.2d 640, 646 (Tex.1996); see also Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 162 (Tex.2003) (“But we may neither rewrite the parties’ contract nor add to its language.”). Instead, “[p]arties to a contract are masters of their own choices and are entitled to select what terms and provisions to include in or omit from a contract.” Thedford Crossing, L.P. v. Tyler Rose Nursery, Inc., 306 S.W.3d 860, 867 (Tex.App.-Tyler 2010, pet. denied) (citing Birnbaum v. SWEPI LP, 48 S.W.3d 254, 257 (Tex.App.-San Antonio 2001, pet. denied)). Specifically, “[the parties] are entitled to select what terms and provisions to include in a contract before executing it. And, in so choosing, each is entitled to rely upon the words selected to demarcate their respective obligations and rights. In short, the parties strike the deal they choose to strike and, thus, voluntarily bind themselves in the manner they choose.” Natural Gas Clearinghouse v. Midgard Energy Co., 113 S.W.3d 400, 407 (Tex.App.-Amarillo 2003, pet. denied) (citing Cross Timbers Oil Co. v. Exxon Corp., 22 S.W.3d 24, 26 (Tex.App.-Amarillo 2000, no pet.)) (emphasis in original).

Zachry argues that if we do not apply the common-law exceptions to the contract’s no-damages-for-delay clause, then the contract would be unbreachable and illusory. Zachry asserts, for example, that the Port could force Zachry to switch its means and methods and thereby cause serious delays in Zachry’s performance. Zachry also avers that the Port could create a delay that lasts in perpetuity and then grant Zachry an extension of time that lasts in perpetuity, thereby breaching the contract while leaving Zachry with no remedy. However, the parties are free to negotiate and agree upon the conditions under which (1) the contractor will recover damages for delay, and (2) another remedy is available to the contractor for any such delay. In June 2004, Zachry unambiguously agreed that it would perform the contract without the benefit of delay damages, even if the delay was caused by the Port’s breach of contract, negligence, or other fault. Zachry faced significant delays; delays it alleged—and the jury agreed—were caused by the Port’s breach of contract. In November 2005, Zachry *852 proceeded with construction “in the wet,” knowing the contract afforded no damages for delay. We cannot rewrite the provision without depriving the Port of the benefit of the bargain the parties reached in June 2004.

Therefore, we conclude that the no-damages-for-delay clause in the parties’ contract precludes Zachry’s recovery of damages for its R & R claim. We sustain Issue 4A.4

4 In Issue 4B, the Port further asserts that the evidence is legally and factually insufficient to support the jury’s finding of any common law “exceptions” included in the court’s charge that could be recognized under Texas law. However, we need not address those arguments in light of our disposition of Issue 4A.

B. Liquidated Damages

By Issue 9A, the Port also seeks reversal of the judgment for liquidated damages. The Port began withholding liquidated damages of $20,000 per day for Zachry’s failure to meet Milestone A and the Wharf’s final completion pursuant to sections 5.05 and 5.06 of the contract.5 The trial court determined that the Port’s withholding liquidated damages constituted a failure to comply with the contract. The Port does not appeal that ruling. Rather, the Port argues that any failure to comply with the contract by withholding liquidated damages was excused because Zachry released such claims as a matter of law.

5 Section 5.05 is entitled “Time of Completion and Liquidated Damages,” while section 5.06 is entitled “Actual Damages in Lieu of Liquidated Damages.” The Port does not appear to complain about the trial court’s invalidation of sections 5.05 and 5.06. Zachry

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points out that the Port does not appeal the directed verdict that the Port breached the contract by failing to pay Zachry $2.36 million based on an invalid liquidated damages clause. In its October 5, 2009 order, the trial court held that section 5.06—the liquidated damages provision—is an unenforceable penalty because it does not make clear that the liquidated damages are in lieu of other damages.

The trial court charged the jury that the Port had failed to comply with the contract by withholding $2.36 million in liquidated damages. The trial court also charged the jury in Question No. 12 that the failure to comply would be excused to the extent of any dollar amounts as to which Zachry had released its claim for withholding liquidated damages.6 Specifically, the trial court instructed the jury to determine “the meaning” of the “Affidavit and Partial Release of Lien for Zachry Construction Corporation” pertaining to Payment Estimate Nos. 21–31 in the context of whether the “[f]ailure to comply by the Port is excused” by the doctrine of release. The jury answered “No.” Thus, in order to prevail here, the Port must conclusively establish that Zachry released its claim for sums withheld as liquidated damages.

6 The trial court instructed the jury in Question No. 12 regarding excuse as to release:

You may also find excuse if you find, by a preponderance of the evidence [,] that Zachry released its claim for the failure to comply. The court also instructed the jury in Question No. 12 regarding excuse as to offset and/or withholding regarding the fenders. The jury’s finding that the Port is excused for the withholding to the extent of $970,000 for the fenders is addressed in Zachry’s cross-appeal.

Section 6 of the contract governs the parties’ rights and responsibilities regarding payments on the agreement. Section 6.01 provides the Contractor’s obligation to create a “Schedule of Costs,” which includes the unit-price basis for all of the various items of work that “shall be the basis for the preparation of and submission of monthly estimates.”

*853 The parties’ payment exhibits confirm this procedure for payment. Zachry submitted its monthly invoice package, which included a “Payment Estimate—Contract Performance.” Each of Zachry’s Payment Estimate forms identified items of work completed during the period; represented the percentage of the unit that was complete; and requested payment for the work completed that month. By item 12, each Payment Estimate form was “presented for payment” by a representative of Zachry. By item 13, the construction manager verified the completion status claimed for the period at issue and approved the request for payment. Item 14 set out categories of deductions—A through N—for items such as prior payments, contractual retainage, and “other deductions.” Items 14(C) and 14(M) are “previous liquidated damages” and “liquidated damages this period.”

On May 10, 2006, the Port faxed a letter to Zachry stating that the Port was (1) “process[ing] [Zachry’s] March 2006 ... invoice” and (2) deducting, from payment on that invoice, “[l]iquidated damages total[ing] $820,000, based on 41 calendar days from February 16 through March 28, 2006 at $20,000 per calendar day.” Zachry’s March 2006 invoice corresponded to Zachry’s Payment Estimate No. 23. By that Payment Estimate, Zachry sought a total payment of $1,885,807.26. The Port withheld $820,000 in liquidated damages from payment on Zachry’s Payment Estimate No. 23.

Nevertheless, on May 17, 2006, Zachry signed an Affidavit and Partial Release of Lien for Zachry Construction Corporation as follows:

ZCC hereby acknowledges and certifies that Port of Houston Authority (PHA) has made partial payment to ZCC on all sums owing on Payment Estimate Number Twenty-three (23) and that it has no further claims against PHA for the portion of the Work completed and listed on the Schedule of Costs in Payment Number Twenty-three (23).

For the period February/March, 2006 through November, 2006, the Port withheld a total of $2.205 million in liquidated damages. In connection with each of these Payment Estimate–Contract Performance forms, Zachry executed an “Affidavit and Partial Release of Lien for Zachry Construction Corporation.” The chart that follows depicts the Payment Estimate number, the period covered, the total liquidated damages withheld, and the date of the Affidavit and Partial Release of Lien:

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Payment Liquidated

Estimate Period Damages Affidavit

Covered Withheld Date No.–––7

21 1/06 No 3/27/06

22 2/06 No 4/14/06

23 3/06 $820,000 5/17/06

24 4/06 $520,000 6/7/06

25 5/06 $220,000 7/24/06

26 6/06 No 8/21/06

27 7/06 $ 35,000 9/22/06

28 8/06 $155,000 10/23/06

29 9/06 $150,000 11/20/06

30 10/06 $155,000 12/15/06

31 11/06 $150,000 1/31/07

7 The Payment Estimate numbers referenced are Zachry’s. Subsequent Partial Release and Indemnity documents reflect that the PHA estimate numbers are not the “Payment Estimate” numbers referenced in each release.

The Port argues that, by signing the May 17, 2006 release, as well as releases covering invoices through November 2006 (Payment Estimate Nos. 23–31), Zachry, *854 as a matter of law, released its claim to $2.205 million in liquidated damages, which the Port withheld cumulatively from payment on those invoices/Payment Estimates. Therefore, according to the Port, any failure to comply with the contract by withholding $2.36 million in liquidated damages is excused to the extent of $2.205 million. Zachry counters that each release, styled “Affidavit and Partial Release of Lien,” unambiguously released nothing © 2015 Thomson Reuters. No claim to original U.S. Government Works. 15

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more than liens.

A release is a writing that provides that a duty or obligation owed to one party to the release is discharged [8] [9] [10]

immediately or upon the occurrence of a condition. See Nat’l Union Fire Ins. Co. of Pittsburg, Pa. v. Ins. Co. of N. Am., 955 S.W.2d 120, 127 (Tex.App.-Houston [14th Dist.] 1997), aff’d sub nom., Keck, Mahin & Cate v. Nat’l Union Fire Ins. Co. of Pittsburg, Pa., 20 S.W.3d 692 (Tex.2000). Releases are subject to the usual rules of contract construction. Id. As in other instances of contract construction, our primary concern is to ascertain the intent of the parties at the time of the execution of the alleged release as expressed in the release. See generally In re Serv. Corp. Int’l, 355 S.W.3d at 661; Epps, 351 S.W.3d at 865.

To construe the release, we may examine evidence of the circumstances surrounding the negotiation and execution [11] [12] [13]

of the release. See Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 848 (Tex.App.-Houston [14th Dist.] 2001, pet. denied); see also Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 731 (Tex.1981) (holding the proper rule is that “evidence of surrounding circumstances may be consulted” and, “[i]f in light of the surrounding circumstances, the language of the contract appears to be capable of only a single meaning, the court can then confine itself to the writing”). We may also consider “the deletions made by the parties” in the course of drafting the instrument at issue. See Houston Pipe Line Co. v. Dwyer, 374 S.W.2d 662, 664 (Tex.1964). Finally, we may consider the title of the document, but such is not dispositive. Enter. Leasing Co. of Houston v. Barrios, 156 S.W.3d 547, 549 (Tex.2004) (per curiam) (“Although we recognize that in certain cases, courts may consider the title of a contract provision or section to interpret a contract, ‘the greater weight must be given to the operative contractual clauses of the agreement.’ ” (quoting Neece v. A.A.A. Realty Co., 159 Tex. 403, 322 S.W.2d 597, 600 (1959))).8

8 Zachry points out that the word “release” appears only once—in the title, immediately followed by “of lien,” and argues that title may be considered in determining intent.

For a release to be effective, it must “mention” the claim to be released. Victoria Bank & Trust Co. v. Brady, 811 S.W.2d [14]

931, 938 (Tex.1991). However, the release need not specifically describe a particular cause of action. See Mem’l Med. Ctr. of E. Tex. v. Keszler, 943 S.W.2d 433, 434–35 (Tex.1997) (per curiam).

We begin with the plain language of the release at issue. Its title is “Affidavit and Partial Release of Lien for Zachry [15] [16]

Construction Corporation.” It states that Zachry “has no further claims against PHA for the portion of the Work completed and listed on the Schedule of Costs” in the respective Payment Estimate. The body of the document contains neither the word “release” nor the word “lien.”9 Yet, the plain language of the *855 sworn statement unambiguously avers that the Port has paid “all sums owing” on the Payment Estimate at issue and that Zachry has “no further claims against PHA for the portion of the Work completed and listed on the Schedule of Costs” in the Payment Estimate at issue. Zachry’s proposed interpretation of these words to mean “no liens” rather than “no further claims” is not a reasonable interpretation of the language.

9 That the body of the provision does not contain the word “release” or “lien” or traditional boilerplate associated with releases or liens is not dispositive of our analysis. Even where the parties’ agreement does not contain the term “release,” “the intent of the parties controls, and the legal effect of the instrument may be a general release.” Knutson v. Morton Foods, Inc., 603 S.W.2d 805, 811 (Tex.1980) (Denton, J., concurring) (citing W. PROSSER, HANDBOOK OF THE LAW OF TORTS, § 49 at 303 (4th ed. 1971)). Zachry provides and we find no authority for the proposition that an agreement cannot legally release a claim unless it uses the word “release.” In fact, if Zachry were correct, then an agreement to “voluntarily relinquish a right known to me” could not operate as a waiver because the magic word is not uttered. We believe such an artificial approach to construing agreements between parties finds no support in Texas law and would be contrary to the primary purpose of contract interpretation-determining the parties’ intent.

The parties also rely on surrounding circumstances to construe the release. Specifically, they compare the language of the release at issue to both the prior and subsequent release forms. Even if we accept the invitation to look beyond the four corners of the affidavit at issue, these surrounding circumstances do not support Zachry’s proposed interpretation of the language at issue.

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Both the prior and subsequent versions are also entitled “Affidavit and Partial Release of Lien for Zachry Construction Corporation.” However, the text of the original or first version of the release states:

ZCC hereby acknowledges and certifies that Port of Houston Authority (PHA) has made partial payment to ZCC on all sums owing on Payment Estimate Number [ ] and that it has no further claims against PHA for the portion of the Work completed and listed on the Schedule of Costs in Payment Number [ ].

In consideration for such partial payment, ZCC ... does hereby waive, release, and relinquish its rights to and discharge, release and acquit Port of Houston Authority ... from any and all causes of action, claims, demand, debts, liabilities, expenses or costs of any kind and every character and nature whatsoever, including but not limited to any lien claims or rights, whether known or unknown, contingent or fixed, either in or arising out of the law of contracts, torts or property rights, whether arising under statutory law or common law, at law or in equity, with respect to the Work for which such partial payment is made....

The third version of the release, used by the parties after the release at issue, states:

ZCC hereby acknowledges and certifies that Port of Houston Authority (PHA) has made partial payment to ZCC on all sums owing on Payment Estimate Number [ ] and that it has no further claims against PHA for the portion of the Work completed and listed on the Schedule of Costs in Payment Number [ ].

In consideration for such partial payment, Zachry Construction Corporation, on its own behalf and on behalf of any other entity claiming by, through or under Zachry Construction Corporation, does hereby waive, release, and relinquish its rights to and discharge, release and acquit Port of Houston Authority from any and all causes of action, claims, demands, debts, liabilities, expenses or costs of any kind and every character and nature whatsoever with respect to *856 the Work accruing or based on events occurring from the commencement of the Work through the date covered by Payment Estimate Number [ ], including by [sic] not limited to any lien claims or rights, whether known or unknown, contingent or fixed, either in or arising out of the law of contracts, tort or property rights, whether arising under statutory law or common law, at law or in equity, less and except only the Outstanding Claims and other matters identified in this Partial Release and Indemnity.

Furthermore, there is pending litigation between the Port of Houston Authority and Zachry Construction Corporation under this contract, namely, the Phase 1A Wharf and Dredging Contract. This litigation is styled Cause No.2006–72970, Zachry Construction Corporation v. the Port of Houston Authority, pending in the 151st Judicial District Court of Harris County, Texas (the “Lawsuit”). Each of Zachry Construction Corporation and the Port of Houston Authority agrees that Zachry Construction Corporation’s execution of this Lien Release for pay Estimate No. [ ] does not in any way release or modify the parties’ rights and obligations under the Phase 1A Wharf and Dredging Contract or constitute a release of any claim or claims that the parties may present in the Lawsuit with respect to Phase 1A Wharf and Dredging Contract.

Thus, the first form included, in addition to the release language at issue here, broad, general release language that purported to cover “all causes of action” including legal or equitable, common-law or statutory claims arising in contract, tort, or property rights. The parties deleted this general release language from the second version of the release at issue here. And, when litigation ensued, the parties revised the form again to reinsert general release language, but to specifically except the claims in this suit. Still, the third version contained the release language at issue here. Thus, the “deletion” gives no support to Zachry’s argument that the release was transformed into a mere release of lien.10

10 Zachry stresses that “the second version deleted the general release language.” (emphasis in original). Zachry contends that “[t]he deletion of the general release language in the second lien release version—the version on which the Port relies—shows the second version was not a general release.” Id. at 70. Zachry’s reliance upon Houston Pipe Line Co., 374 S.W.2d at 664, and Hall v. Lone Star Gas Co., 954 S.W.2d 174, 176 (Tex.App.-Austin 1997, pet. denied), for that argument blurs an important distinction between deletions and omissions in this context. To be precise, the language upon which Zachry focuses was not deleted in the sense of appearing on a preprinted form and then being stricken through using an “x” or some other mark visible on the face of the document. See, e.g., Houston Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 466 (Tex.2011); Houston Pipe Line Co., 374 S.W.2d at 663; Gibson v. Turner, 156 Tex. 289, 294 S.W.2d 781, 782 (1956). The language upon which Zachry focuses was omitted from the operative version of the document but appeared in other versions. There is reason to question how much weight properly can be given to omitted language from other versions of the document in light of the parol evidence rule. See, e.g., Fiess v. State Farm Lloyds, 202 S.W.3d 744, 747 (Tex.2006) (“Evidence of prior policies is extrinsic

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evidence, and thus inadmissible unless the policy is ambiguous.... And while we have looked at a prior policy in deciding between reasonable constructions of a current one, we have never done so in lieu of construing the current one at all.”)

Further, the parties point to section 6.07 of the contract to guide the interpretation of the release. Section 6.07 required Zachry to release any further “claim[s] for payment” as to Zachry’s prior invoice/Payment Estimate.11 It further provides, in *857 pertinent part, that such waivers and releases of liens shall provide, “at a minimum, that all amounts due and payable to the Contractor and each such Subcontractor and Supplier, as of the date of such invoice ... have been paid in full.” Zachry relies on the “to the extent set out in the preceding sentence” language as an indication that the contract did not require it to release a claim that payment had not been made in full; just a release of any lien arising out of the failure to do so. The Port urges that the subject provision unambiguously released any further claim for payment for the work accomplished and billed on the relevant payment estimate and, thus, released any claim that there was no payment in full by virtue of a liquidated damages offset. Zachry argues that the subject provision unambiguously released nothing more than claims for payment to assure an effective release of liens. Once the parties eliminated the “general release language,” Zachry insists it no longer released its breach of contract claim with each payment.

11 Section 6.07 of the contract states, in pertinent part:

As a condition precedent to the obligation of the Port Authority to make payment on any invoice, the Contractor shall supply the Port Authority with waivers and releases of liens (including without limitation all mechanics’ and materialmens’ liens and any other type of security interest), which waivers and releases shall be duly executed and acknowledged by the Contractor and each Subcontractor and Supplier expecting payment from [the] Contractor in respect of such invoice in order to assure an effective release of such liens to the maximum extent permitted by Applicable Law. The waivers and releases of liens shall provide, at a minimum, that all amounts due and payable to the Contractor and each such Subcontractor and Supplier, as of the date of such invoice and as of the date of the last payment received by the Contractor and each such Subcontractor and Supplier have been paid in full and that the Contractor and each such Subcontractor and Supplier waives, releases and relinquishes any lien (including without limitation any mechanic’s or materialman’s lien), security interest and claim for payment to the extent set out the preceding sentence.

[17]

Zachry’s construction of version two of the release is inconsistent with the surrounding circumstances. First, as mentioned, the only reference to “lien” is the heading of the affidavit. It cannot be limiting language, however, because it is the same heading for each of the three versions, including the first version that Zachry admits operated as a broad release of claims.12 Second, section 6.07 does not provide a limiting circumstance. Although section 6.07 may not require Zachry to release anything more than liens arising from failure to make payment, even Zachry acknowledges that it released far more in connection with version one because version one mentions claims, including liens. Similarly, version two mentions claims, not liens, for the portion of the Work completed and listed. As such, any limitation of section 6.07 is not a limitation on our construction of the release provision.

12 A broad, general release releases every potential cause of action pertaining to the subject matter. See Keck, Mahin & Cate, 20 S.W.3d at 698.

We conclude the provision is subject to one reasonable interpretation, that is: the provision at issue (version two) releases any further claim for payment for work accomplished and billed by the relevant payment estimate, which also operates to release any lien for that same work because payment is made in full. Because the general release language is omitted, the provision does not release:

• claims arising in tort;

• claims to adjudicate property rights;

• claims for any and all causes of action, claims, demand, debts, liabilities, *858 expenses, or costs of any kind and every character and nature whatsoever; or

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• all claims for breach of contract.

But, even without the general release language, the specific release language of version two releases claims for breach of contract predicated upon a failure to make payment for work accomplished, billed, and paid—in whole or in part—on a particular payment estimate.

Our dissenting colleague concludes that the Port has failed to establish release as a matter of law because the documents at issue are, at a minimum, ambiguous. Meticulously comparing the release documents to the Payment Estimates at issue, the dissent urges that the release leaves open the question of what document is referenced in each release. Such asserted ambiguity is not one argued by Zachry, however. Zachry does not urge that the releases do not match the payment estimates. Zachry does not urge that the term Payment Estimate is ambiguous in its reference to Zachry’s payment estimates rather than the Port’s. Zachry does not urge that the absence of evidence identifying a payment release seeking payment in the same quantity released defeats the release. To the contrary, Zachry urges that the release is a release to the full extent of the payment estimates; it simply urges that the release is a full release of lien, rather than a full release of payment. [18]

Moreover, there is no ambiguity in “what exactly has been released” as the dissent suggests. The language of the release goes beyond saying Zachry has no further claims against PHA. The release says “[Zachry] has no further claims against PHA for the portion of the Work completed and listed on the Schedule of Costs in Payment Number –––.” (emphasis added). It is undisputed on this record that the Port had already withheld all of the liquidated damages that it ever did withhold by the time Zachry signed the subject release in January 2007. Thus, it released any further claim for the work that had been completed and listed on the Schedule of Costs in Payment Estimate 31. Texas law requires identification of the claim to be released—not quantification.

In summary, we conclude that, when Zachry signed the “Affidavit and Partial Release of Lien,” stating that the Port “has made partial payment to ZCC on all sums owing on Payment Estimate Number Thirty (30) and that it has no further claims against PHA for the portion of the Work completed and listed on the Schedule of Costs in Payment Estimate Number 30,” Zachry unambiguously discharged or released the Port from any further duty or obligation to pay sums billed through Payment Estimate No. 29. See Nat’l Union Fire Ins. Co. of Pittsburg, Pa., 955 S.W.2d at 127. The “Affidavit and Partial Release of Lien” mentions the claims being released: “claims against PHA for the portion of the Work completed and listed on the Schedule of Costs in Payment Estimate Number 30.” See Victoria Bank & Trust Co., 811 S.W.2d at 938. As Payment Estimate No. 30 included offsets for liquidated damages in the sum of $2.205 million, Zachry has no further claims for payment arising from the work completed and listed on that Payment Estimate.

We conclude that if the Port failed to comply with the contract by withholding liquidated damages, such failure was excused, in part, as a matter of law by Zachry’s release.13 We sustain the Port’s Issue 9A.

13 The Port also raises the same release argument in response to Zachry’s issue on cross-appeal regarding the $600,000 withheld for dredging. For the same reason we sustain the Port’s Issue 9A, we overrule Zachry’s Cross–Appeal Issue 1A and B, in which Zachry claims that it is entitled to judgment as a matter of law on the $600,000 withheld for dredging. The jury found in Question No. 9 that the Port did not fail to comply with the contract by withholding $600,000 for dredging. Zachry’s claim to recover the $600,000 for dredging is barred by release as a matter of law, just the same as the $2.205 million in liquidated damages withheld from invoice payments addressed above.

*859 C. $970,000 Offset for Defective Fenders

The Port claimed a right under section 6.05 of the contract to withhold or offset certain liquidated damage amounts because of alleged damages related to Wharf fenders. Question No. 12A asked the jury whether the Port’s failure to comply with the contract by withholding $2.36 million in liquidated damages was excused, in whole or part, “by offset and/or withholding” for Zachry’s failure to comply with the contract with respect to fender corrosion.14 The jury found that the Port was entitled to withhold or offset for fender damage in the amount of $970,000. The trial court entered judgment on Zachry’s R & R claim, but offset the $970,000 against Zachry’s damage award.

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14 The trial court instructed the jury in Question No. 12 regarding excuse as to offset and/or withholding:

You may find excuse if you find, by a preponderance of the evidence, that the Port is entitled to withhold for fenders under § 6.05 of the General Conditions of the Contract and/or that the Port is entitled to offset for fenders under § 6.17 of the General Conditions of the Contract. The Port is entitled to withhold and/or offset for fenders under these provisions if you find, by a preponderance of the evidence, that, with respect to the fenders, Zachry failed to comply with the Contract resulting in a loss to the Port.

By its Cross–Appeal Issue 2, Zachry contends that it is entitled to judgment rendered in its favor on the $970,000 because the evidence is legally and factually insufficient to support the jury’s findings (1) that Zachry breached the contract in constructing the fenders, (2) that any breach caused the fenders’ corrosion and the Port’s damage, or (3) as to any amount of damages the Port suffered as a result. Although we agree that (a) the presentation of evidence on the fenders was brief and not emphasized with the jury; and (b) there is competing evidence on the subject, we disagree that that evidence is legally or factually insufficient. [19]

In reviewing the legal sufficiency of the evidence, we view the evidence in the light most favorable to the fact finding, crediting favorable evidence if reasonable persons could, and disregarding contrary evidence unless reasonable persons could not. City of Keller v. Wilson, 168 S.W.3d 802, 822, 827 (Tex.2005). We may not sustain a legal sufficiency, or “no evidence” point unless the record demonstrates that: (1) there is a complete absence of a vital fact; (2) the court is barred by the rules of law or evidence from giving weight to the only evidence offered to prove a vital fact; (3) the evidence to prove a vital fact is no more than a scintilla; or (4) the evidence conclusively established the opposite of the vital fact. Id. at 810. To evaluate the factual sufficiency of the evidence, we consider all the evidence and will set aside the finding only if the evidence supporting the finding is so weak or so against the overwhelming weight of the evidence that the finding is clearly wrong and unjust. Maritime Overseas Corp. v. Ellis, 971 S.W.2d 402, 406–07 (Tex.1998); Cain v. Bain, 709 S.W.2d 175, 176 (Tex.1986) (per curiam).

The Port’s Bayport engineer Mark Vincent testified about the Wharf fenders, *860 which had a life expectancy of 30 years but corroded within 90 days. He stated that the Port incurred damages in the approximate amount of $978,000 for “recoating” repairs. He also noted that the Port sent a warranty deficiency notice to Zachry on the fenders but Zachry refused to repair them. [20]

The coating at issue is governed by Technical Specification Section 09950. The jury received evidence that (a) this specification requires Zachry to “apply 2–3 mils of the specified epoxy” coating; and (b) “[t]hickness tests conducted on the upper portion of the fenders ranged from 18 to 26 mils including the seal coat.” From this evidence, the jury was entitled to infer that Zachry applied coating well above the 2–3 mils level specified by the contract. Thus, the evidence is legally sufficient to support the jury’s finding that Zachry failed to comply with the contract and, specifically, Technical Specification Section 09950. [21]

The jury also heard evidence that the purpose of the above technical specification on coating is “to obtain full continuity of the epoxy and total sealing of porosity.” The fenders were to be sealed because a portion of each fender is installed under water. By his report,15 admitted without objection, Stephen Pinney, an engineer hired by the Port to inspect the fenders, indicated that his personal inspection revealed that the three-foot portion of the fenders submerged “failed down to the bare steel” but that the portion of the fenders “above the splash zone” remained intact. Pinney stated that the most probable cause of the failure is:

15 Zachry cites no case, and we find none, to support Zachry’s suggestion that if documentary evidence is “not discussed by any witness” or “otherwise brought to the jury’s attention,” it may be discounted or disregarded on appellate review.

• the seal coat applied to the metalizing was insufficiently thinned;

• because the seal coat was insufficiently thinned, it was not able to penetrate into the porous metalized aluminum

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substrate;

• because the seal coat did not penetrate, it remained on the surface;

• because the seal coat remained on the surface, the aluminum pores remained open;

• because the aluminum pores remained open, they filled with seawater;

• because the aluminum filled with seawater, it corroded.

This evidence is both legally and factually sufficient to support the jury’s finding that Zachry’s failure to comply with the contract specification regarding coating compromised the sealing of porosity and directly caused the fenders’ corrosion. [22]

Vincent also testified that the approximate cost to repair the fenders that corroded “as soon as they were put in the water”

was $978,000. Zachry urges that this testimony is legally insufficient16 because at no point does Vincent or any other witness provide an opinion that $970,000 is the “reasonable and necessary” cost to repair the fenders. The Port counters that the cost to repair the fenders need not be “reasonable and necessary” where, as here, the contract itself does not require that the loss be “reasonable and necessary.”

16 Zachry also argues that, even if the damages evidence is sufficient, the court should reverse and remand for a new trial, as the trial court failed to instruct the jury that it could only award “reasonable and necessary” damages. We address these points together.

*861 We agree with the Port and conclude that the trial court did not err with regard to the jury charge. For this court to imply a requirement that the costs to repair be “reasonable and necessary” would be tantamount to modifying the contract. See Aetna Cas. & Sur. Co. v. Marshall, 699 S.W.2d 896, 902 (Tex.App.-Houston [1st Dist.] 1985), aff’d, 724 S.W.2d 770 (Tex.1987); see also Simien v. Unifund CCR Partners, 321 S.W.3d 235, 248 (Tex.App.-Houston [1st Dist.] 2010, no pet.). Zachry’s authority is inapposite as it pertains to interpreting an oral contract. See Walker & Assocs. Surveying, Inc. v. Austin, 301 S.W.3d 909, 919 (Tex.App.-Texarkana 2009, no pet.) (ascertaining the terms of an oral contract where there was “little or no agreement reached about the level of competence of the workers provided”). Therefore, the jury’s determination of $970,000 as the cost to repair the fender is supported by Vincent’s testimony about $978,000–worth of repairs.

We overrule Zachry’s Cross–Appeal Issue 2 regarding the Wharf fender offset award.

D. Attorney’s Fees

In Issue 11, the Port argues that it is entitled to the attorney’s fees found by the jury for the R & R and withholding claims because the Port is entitled to judgment on those claims.

Zachry brought multiple claims or theories of the Port’s breach of the contract: the R & R claim, i.e., failure to comply with Change Order 4 and section 5.10 of the contract, and claims for withholding $2.36 million in liquidated damages and $600,000 for dredging. The jury determined that a “reasonable fee for necessary services of the Port’s attorneys” on “Zachry’s Claim Relating to Change Order 4 and/or § 5.10 of the Contract” is $10,500,000 for trial; $90,000 for an appeal to the court of appeals; and $22,500 for an appeal to the Texas Supreme Court. The jury determined that a reasonable fee for “Zachry’s Claim for Withholding the $2.36 million as liquidated damages and the $600,000 for dredging” is $80,250 for trial; $3,750 for an appeal to the court of appeals; and $1,250.00 for an appeal to the Texas Supreme Court.

Section 3.10 of the contract makes Zachry liable for the Port’s attorney’s fees if Zachry brings “a claim” and “does not prevail with respect to such claim.”17 We have determined that Zachry has not prevailed with respect to “Zachry’s Claim Relating to Change Order 4 and/or § 5.10 of the Contract.” We also have determined that Zachry has not prevailed with respect to “Zachry’s Claim for Withholding the $2.36 million as liquidated damages and the $600,000 for dredging,” i.e., we have sustained the Port’s Issue 9A that the Port’s withholding liquidated damages was excused by $2.205 million of the $2.36 million damages awarded, and we have overruled Zachry’s Cross–Appeal Issue 2 on the Port’s $970,000 offset of the

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sum awarded for liquidated damages. Having determined that Zachry did not prevail on the three claims or theories presented to the jury, we need not determine whether Zachry brought one or two or three claims.18 We need only determine whether *862 the sums awarded by the jury for the Port’s reasonable and necessary attorney’s fees are supported by factually sufficient evidence.

17 Section 3.10 states:

If Contractor brings any claim against the Port Authority and Contractor does not prevail with respect to such claim, Contractor shall be liable for all attorney’s fees incurred by the Port Authority as a result of such claim.

18 If the Port had succeeded on appeal on only the judgment for the R & R claim, Zachry claims that the Port would not be entitled to any attorney’s fees on the R & R claim because Zachry would still have prevailed on its breach of contract claim. That is, Zachry argues that it brought one breach of contract claim, but different theories of breach: R & R damages and withholding damages. The Port contends that Zachry brought multiple claims, entitling the Port to the segregated attorney’s fees on the R & R claim if a take-nothing judgment is rendered on the R & R claim, but not the withholding claims. However, because Zachry has not prevailed on any of its “claims” or “theories,” we need not address these arguments.

By Cross–Appeal Issue 3, Zachry contends that in the event that Zachry does not prevail on any theory underlying its breach-of-contract claim, Zachry would still be entitled to a new trial on attorney’s fees. In support of its claim for attorney’s fees, the Port offered the testimony of its billing attorney, Karen White, and its designated attorney’s fees expert, Dan Downey. Zachry claims that (1) the trial court erred by admitting the testimony of White because she was not designated as an attorney’s fees expert; and (2) Downey’s testimony is factually insufficient to support the jury’s finding on the amount of the Port’s attorney’s fees.

We first address whether the trial court erred in admitting White’s testimony. Prior to White’s testifying, the trial court ruled that she could testify as a fact witness, but not as an expert because she had not been designated as an expert.19 That is, White would not be allowed to testify as the reasonableness of the segregation of the attorney’s fees. Zachry complains here that White did, in fact, provide expert testimony. The Port urges that Zachry waived any objection to White’s testimony by failing to obtain a ruling.

19 Specifically, the trial court ordered that White could “testify as a fact witness only and without reference to these billing records, period, the end.... And so no reference to the billing records and no opinions.” In response to Zachry’s counsel’s clarification that White would “only testify as to the methodology by which this segregation and she [will] not be given [sic] any kind of an opinion as to the reasonableness of segregation. That would be Mr. Downey,” the trial court responded, “Right.”

[23]

During White’s testimony, Zachry objected twice that White’s testimony was drifting into expert opinions. The first occurred when White, after describing the document production process, stated “[w]e didn’t feel that they had produced every document to us that they should have....” Zachry “object[ed] at this point” because White was to be “a very limited fact witness, not an expert,” and was being tendered as a witness for the “limited purpose of segregation. That is, to tell us exactly how the segregation of the fees was identified and determined.” The trial court overruled the objection, stating that it would “let White testify about these subjects.” White provided further testimony on the document-production process, including the huge volume of documents produced by each side and the process for reviewing those documents. We find the trial court did not abuse its discretion in ruling that document-production testimony was not expert testimony.

The second objection occurred during White’s response the question: “[W]hat was your role as a billing attorney?” White explained the process of inputting time and then stated that, “as billing attorney, then I review the bills to make sure that everything’s properly chargeable to the client, that it’s properly....” Zachry’s counsel objected, again complaining about the testimony in light of the trial court’s expert-opinion ruling. The trial court agreed that when White “talks about whether a particular item was properly billable to the client,” she is offering an *863 opinion. Therefore, the Port agreed to “ask Ms. White not to add whether something was properly billable to the client.” Thus, the trial court did not make a ruling adverse to Zachry or otherwise deny Zachry relief.20

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20 Although Zachry mentions the Port’s failure to disclose fee statements as a basis for excluding White’s testimony, the trial court did not rule on this objection because the Port’s attorney withdrew the pending question. Therefore, we do not address that argument.

We now address Zachry’s complaint that the testimony of the Port’s expert, Dan Downy, was not factually sufficient to support the jury’s findings on attorney’s fees.21 Downey opined that the attorney’s fees incurred by the Port were reasonable and necessary, and that the fees were properly segregated. The jury heard about the Port’s process for compiling factual data on attorneys’ services rendered. Port paralegal Holly Gray searched the computerized records with certain search terms and created a spreadsheet that included all of the hours and times for any entry that “had any of the terms in it.” Gray provided that spreadsheet to Downey.

21 Downey testified that he had been a Harris County trial judge from 1988 to 1994, and had been a lawyer or judge in Texas for about 33 years. Downey further stated that he had not testified previously as an attorney’s fees expert in any cases other than his own and that, as a trial judge, attorney’s fees did not frequently come before him as a contested issue.

Downey identified the bases for his opinions as to the reasonableness and necessity of the Port’s legal fees. In addition to the spreadsheet, Downey reviewed the pleading and discovery index and requested to see particular pleadings and motions “so [he] could get a handle on what was involved.” Downey then conducted separate interviews with individual attorneys involved in the case concerning “what their role was and how they set about performing that task.” Downey “was trying to get a handle on how much work is involved in those tasks, to see if it makes sense and matches up with the time that they have logged for those tasks.” Downey interviewed the attorneys more than once. Downey also interviewed the legal assistants. The jury saw several exhibits containing Downey’s notes as well as compilations of fees by month and attorney.

Zachry’s attorney’s fees expert, William Junell, agreed that the lawsuit between Zachry and the Port amounted to an “all-out-war between the parties for ... three years.”22 However, Junell disagreed with Downey’s opinion on the reasonableness and necessity of the fees incurred by the Port.

22 Junell testified that he had been practicing law for over 38 years and had served as an expert witness on attorney’s fees approximately a dozen times.

Both Junell and Downey testified about the factors applicable to an attorney’s fee award.23 The jury heard that the *864 [24]

Port’s fees were two-and-a-half times more than Zachry’s in October 2008. That “raised red flags in [Junell’s] mind.” Downey, however, explained that the primary difference related to the review of documents. Downey was satisfied that the work the Port lawyers performed in reviewing documents “was fair and reasonable and necessary.”

23 The factors are (1) the time and labor required, the novelty and difficulty of the questions involved, and the skill required to perform the legal service properly; (2) the likelihood that the acceptance of the particular employment will preclude other employment; (3) the fee customarily charged in the locality for similar legal services; (4) the amount involved and the results obtained; (5) the time limitations imposed by the client or by the circumstances; (6) the nature and length of the professional relationship with the client; (7) the experience, reputation, and ability of the lawyer or lawyers performing the services; and (8) whether the fee is fixed or contingent on results obtained or uncertainty of collection before the legal services have been rendered. Arthur Andersen & Co. v. Perry Equip. Corp., 945 S.W.2d 812, 818 (Tex.1997). This court considers those factors to be guidelines rather than elements of proof. See Academy Corp. v. Interior Buildout & Turnkey Const., Inc., 21 S.W.3d 732, 742 (Tex.App.-Houston [14th Dist.] 2000, no pet.).

[25]

The jury also heard Junell’s criticism that Downey did not review any of the underlying bills for the 44,000 hours of attorney time for which the Port sought recovery.24 Junell testified that “we do not have the required information that tells you what services were rendered by what lawyers on the occasion in case and at what rate for those services.” But Downey explained that he favored individual interviews over the actual bills because he felt it was likely that the bills contained

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privileged information and would inadequately explain the activities of the attorneys that he needed to consider. He also explained that he had taken out certain aspects of Port fees that he did not consider appropriate.

24 Here, the Port urges that Zachry has waived its sufficiency issue because its complaints are “waived challenges to his methodology.” However, Zachry urges a factual sufficiency challenge to fees, not a legal sufficiency challenge. The Port cites no case, and we find none, that holds that failure to challenge a fee expert’s methodology waives a factual sufficiency complaint on appeal.

Ultimately, through a thorough cross-examination of Downey, Zachry made the jury aware of the weaknesses in the Port’s attorney’s fee claim: the Port was seeking $15 million in attorney’s fees to defend Zachry’s $30 million claims; the Port had four separate law firms defending it; Downey had not documented what tasks were performed by each attorney; and Downey had not used actual bills to form his opinion even though that is the standard practice for attorney’s fee witnesses, and though they would have provided some verification of the attorneys’ representation of their time spent. [26]

We conclude that the evidence is factually sufficient to support the fee award in this case, though the evidence would also have supported far less. The most significant concern about this award is the relationship between the fee awarded and the amount in controversy, particularly when compared to the fees incurred by Zachry. However, this court has previously determined, albeit on much smaller sums, that a fee award that was two times the amount in controversy was supported by legally and factually sufficient evidence. See Bencon Mgmt. & Gen. Contracting, Inc. v. Boyer, Inc., 178 S.W.3d 198, 209–10 (Tex.App.-Houston [14th Dist.] 2005, no pet.) The relationship between the fee and the amount in controversy is merely a factor that we examine. See USAA Cnty. Mut. Ins. Co. v. Cook, 241 S.W.3d 93, 103 (Tex.App.-Houston [1st Dist.] 2007, no pet.). Moreover, the testimony provides sufficient evidence to support this discrepancy. Downey’s and White’s testimony illustrated that the majority of the differential occurred in the area of discovery and, specifically, the pursuit and review of document production. White testified that rather than provide copies of responsive documents to the Port, Zachry asked the Port’s attorneys “to come out to the site facility and review documents there.” Thus, two Port attorneys went to an un-air conditioned, metal container facility “crammed full of boxes not organized in any manner.” They pulled boxes outside of the container, one at a time, “and sat under a tree in May out at the wharf site *865 and reviewed documents searching for things that might be responsive.” While Junell testified about the volume of material reviewed by each side, he spoke of electronic documents; thus, the jury was free to believe that the method of document production played a role in the number of hours the Port attorneys needed to spend to accomplish the task. We conclude that the evidence is factually sufficient to support the jury’s finding on attorney’s fees.

We overrule Zachry’s Cross–Appeal Issue 3.

III. CONCLUSION

To summarize, we hold that the application of the no-damages-for-delay clause precludes Zachry’s claim for delay or hindrance damages on its claim for damages on its R & R claim.

We further hold that Zachry released, as a matter of law, $2.205 million of its $2.36 million claim for the Port’s withholding liquidated damages. We further hold that the evidence is legally and factually sufficient to support the jury’s finding of the Port’s offset of $970,000 for defective fenders. Because the amount of liquidated damages that Zachry released and the amount of offset the jury found for defective fenders is greater than the $2.36 million that Zachry sought for the Port’s withholding of liquidated damages, we hold that Zachry may not recover on its $2.36 million claim for withholding liquidated damages.

We further hold that the trial court did not err in failing to rule, as a matter of law, that the Port breached the contract by withholding $600,000 for dredging.

We further hold that the Port is entitled to recover attorney’s fees as found by the jury with respect to Zachry’s R & R claim as follows: (1) $10,500,000 for trial, (2) $90,000 for appeal to the court of appeals, and (3) $22,500 for appeal to the Texas © 2015 Thomson Reuters. No claim to original U.S. Government Works. 24

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Supreme Court; and with respect to Zachry’s withholding claims as follows: (1) $80,250 for trial, (2) $3,750 for appeal to the court of appeals, and (3) $1,250 for appeal to the Texas Supreme Court.25

25 Having sustained the Port’s Issue 4A regarding Zachry’s delay or hindrance damages purportedly sustained as a result of the Port’s R & R response, and Issue 9A regarding the Port’s withholding of liquidated damages, we need not address the Port’s other issues. Further, as we do not reach the Port’s Issue 3 asserting that sovereign immunity was not waived, we need not address the concern of amicus curiae, The Surety & Fidelity Association of America, regarding whether a local government entity is subject to the same measure of contractual damages as any other contracting party unless such damages fall within the express limitations of Section 271.153(b) of the Texas Local Government Code.

Thus, we reverse the judgment awarding Zachry $18,602,677 in damages on its R & R claim and $2.36 million in liquidated damages and render judgment that Zachry take nothing on those claims. We render judgment that the Port have and recover attorney’s fees from Zachry with respect to the R & R claim as follows: (1) $10,500,000 for trial, (2) $90,000 for appeal to the court of appeals, and (3) $22,500 for appeal to the Texas Supreme Court; and with respect to the withholding claims: (1) $80,250 for trial, (2) $3,750 for appeal to the court of appeals, and (3) $1,250 for appeal to the Texas Supreme Court.

Accordingly, we render judgment that the Port recover attorney’s fees and reverse and render judgment that Zachry take nothing on its claims.

Justice CHRISTOPHER, J., dissenting

*866 TRACY CHRISTOPHER, Justice, dissenting.

I respectfully dissent from Part B of the majority’s opinion, in which liquidated damages are addressed. In my opinion, the documents titled “Partial Release of Lien” do not release Zachry’s claim for the wrongfully withheld liquidated damages. I would uphold the trial court’s decision that the documents are ambiguous and the jury’s decision that Zachry did not release those damages.

The majority concludes that the documents at issue are unambiguous. I disagree. Applying the following rules of construction, I would hold that, at most, the documents are ambiguous and that the issue was properly submitted to the jury. I would consider what a release is, how to construe it, and the special provisions related to releases.

A. Rules of Construction

1. A release extinguishes a claim or cause of action.

A release is a writing providing that a duty or obligation owed to one party to the release is discharged immediately or on the occurrence of a condition. See Nat’l Union Fire Ins. Co. of Pittsburg, Pa. v. Ins. Co. of N. Am., 955 S.W.2d 120, 127 (Tex.App.-Houston [14th Dist.] 1997), aff’d sub nom. Keck, Mahin & Cate v. Nat’l Union Fire Ins. Co., 20 S.W.3d 692 (Tex.2000); Restatement (Second) of Contracts § 284 (1981). A release of a claim or cause of action extinguishes the claim or cause of action. Dresser Indus., Inc. v. Page Petroleum, Inc., 853 S.W.2d 505, 508 (Tex.1993).

2. A release is subject to the rules governing contract construction.

Under Texas law, a release is a contract and is subject to the rules governing contract construction. See Williams v. Glash, 789 S.W.2d 261, 264 (Tex.1990) (holding that a release is a contract subject to avoidance on same grounds as any other contract); Loy v. Kuykendall, 347 S.W.2d 726, 728 (Tex.Civ.App.-San Antonio 1961, writ ref’d n.r.e.) (treating a release as a © 2015 Thomson Reuters. No claim to original U.S. Government Works. 25

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contract subject to rules governing construction thereof); RESTATEMENT (SECOND) OF CONTRACTSSSSS § 284 cmt. c.

a. The primary concern is to ascertain the true intent of the parties.

In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. Coker v. Coker, 650 S.W.2d 391, 393 (Tex.1983); Nat’l Union, 955 S.W.2d at 127. The intention of the parties is discovered primarily by reference to the words used in the contract. Nat’l Union, 955 S.W.2d at 127. To determine the parties’ intentions, courts should examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Coker, 650 S.W.2d at 393; Nat’l Union, 955 S.W.2d at 127. No single provision taken alone will be given controlling effect; rather, all of the provisions must be considered with reference to the entire contract. Id.

b. The court may consider surrounding circumstances.

Evidence of circumstances surrounding the execution of the contract may be considered in the construction of an unambiguous instrument, even though oral statements of the parties’ intentions are inadmissible to vary or contradict the terms of the agreement. Med. Towers, Ltd. v. St. Luke’s Episcopal Hosp., 750 S.W.2d 820, 823 (Tex.App.-Houston [14th Dist.] 1988, writ denied) (citing *867 Sun Oil Co. (Delaware) v. Madeley, 626 S.W.2d 726, 731 (Tex.1982)). The circumstances help to illuminate the contractual language chosen by the parties and enable evaluation of “ ‘the objects and purposes intended to be accomplished by them in entering into the contract.’ ” Id. (quoting Garcia v. King, 139 Tex. 578, 585, 164 S.W.2d 509, 512 (1942)). A contract should be construed by determining how the “reasonable person” would have used and understood such language, considering the circumstances surrounding its negotiation and keeping in mind the purposes intended to be accomplished by the parties when entering into the contract. Nat’l Union, 955 S.W.2d at 128 (citing Manzo v. Ford, 731 S.W.2d 673, 676 (Tex.App.-Houston [14th Dist.] 1987, no writ)).

c. The court may consider other contracts pertaining to the same transaction.

Instruments pertaining to the same transaction should be read together to ascertain the parties’ intent as to the meaning of the release, even if the parties executed them at different times and the instruments do not expressly refer to each other. See Fort Worth Indep. Sch. Dist. v. City of Fort Worth, 22 S.W.3d 831, 840 (Tex.2000); In re Sterling Chems., Inc., 261 S.W.3d 805, 810 (Tex.App.-Houston [14th Dist.] 2008, no pet.); Dorsett v. Cross, 106 S.W.3d 213, 217 (Tex.App.-Houston [1st Dist.] 2003, pet. denied).

d. The court may consider deletions made by the parties.

We may also consider “the deletions made by the parties” in the course of drafting the instrument at issue. See Hous. Exploration Co. v. Wellington Underwriting Agencies, Ltd., 352 S.W.3d 462, 470–71 (Tex.2011); Hous. Pipe Line Co. v. Dwyer, 374 S.W.2d 662, 664 (Tex.1964).

e. The court may consider the document’s title.

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We may consider the title of the document. Enter. Leasing Co. of Hous. v. Barrios, 156 S.W.3d 547, 549 (Tex.2004) (per curiam) (“Although we recognize that in certain cases, courts may consider the title of a contract provision or section to interpret a contract, ‘the greater weight must be given to the operative contractual clauses of the agreement.’ ” (quoting Neece v. A.A.A. Realty Co., 159 Tex. 403, 322 S.W.2d 597, 600 (1959))). The title also can create ambiguity when it differs from the body. See Lone Star Cement Corp. v. Fair, 467 S.W.2d 402, 404–05 (Tex.1971) (when caption of a judicial order dismisses only one party while the body purports to dismiss an entire cause, the order is ambiguous); Forbau v. Aetna Life Ins. Co., 876 S.W.2d 132, 138 n. 3 (Tex.1994) (title of insurance contract that is repugnant or misleading as to coverage creates an ambiguity).

f. The court may not rewrite a contract or add to its language.

A court should not rewrite a contract or add to its language. Am. Mfrs. Mut. Ins. Co. v. Schaefer, 124 S.W.3d 154, 162 (Tex.2003); White Oak Operating Co. v. BLR Constr. Cos., 362 S.W.3d 725, 733 (Tex.App.-Houston [14th Dist.] 2011, no pet.).

3. Specific rules apply to releases.

In addition to these basic contract construction rules, however, we must take into account the rules that specifically apply to releases.

a. A release must specifically mention the claim to be released.

To effectively release a claim in Texas, the releasing instrument must mention the claim to be released. See Victoria Bank & *868 Trust Co. v. Brady, 811 S.W.2d 931, 938 (Tex.1991).

b. General releases are to be narrowly construed.

General, categorical releases are to be narrowly construed. Duncan v. Cessna Aircraft Co., 665 S.W.2d 414, 422 (Tex.1984). See also Victoria Bank, 811 S.W.2d at 938 (applying this principle in limiting the scope of release so that “any claims not clearly within the subject matter of the release are not discharged”) (emphasis added); Baty v. ProTech Ins. Agency, 63 S.W.3d 841, 850 n. 7 (Tex.App.-Houston [14th Dist.] 2001, pet. denied) (collecting cases in which the scope of a general release was narrowly construed).

c. Typical release language provides that the parties “release, discharge, and relinquish” claims.

Typical release language is “release, discharge, relinquish.” Derr Constr. Co. v. City of Hous., 846 S.W.2d 854, 859 (Tex. App.-Houston [14th Dist.] 1992, no writ). See also Green Int’l, Inc. v. Solis, 951 S.W.2d 384, 387 (Tex.1997) (contract language that “Contractor shall not be liable to the Subcontractor for delay to Subcontractor’s work by the act, neglect or default of Owner” is not a release because it does not extinguish a claim or establish an absolute bar to any right of action on the released matter).

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B. Application of the Rules to the Documents at Issue

1. There is little evidence about the parties’ intent and surrounding circumstances.

There was very little testimony at trial about the Partial Release of Liens. As to the intent of the parties and the surrounding circumstances, we know only the following: Zachry initially signed a document (“Release Form No. 1”) containing broad release language in the body of the document. See majority opinion, ante at 855–56. Beginning in September of 2004, Zachry revised the release agreement, leaving only two paragraphs in the body of the document and deleting the broad release language (“Release Form No. 2”).1 In 2007, after all of the liquidated damages had already been withheld, the Port rejected an invoice from Zachry with the note, “not accepted at this time without proper release of lien form.” The lawyers for Zachry and the Port then got together and came up with an acceptable release form, which once again included the broad release language with a carve-out for all claims in this lawsuit (“Release Form No. 3”). See majority opinion, ante at 856. The Port’s witness, Andy Thiess, called the documents “releases” but claimed that he did not know their legal effect. Zachry’s witness Jean Abiassi claimed that the releases were only releases of liens, as could be seen by the titles of the documents and section 6.07 of the contract.

1 Although I do not think that Release Form No. 2 should be called a release at all, I will refer to it as a release as the majority has done.

2. The releases refer to other documents.

The jury was asked to decide whether certain numbered documents released the liquidated-damages claim. Each release refers to another document, and to understand what was being released, it was necessary to know the contents of the referenced document. But, the record contains no testimony matching a release and the document to which it refers. The jury received no charge instructions about how to match a release with the document to which it refers, and the referenced documents are not attached to the exhibits in *869 the record. The absence of evidence from which to identify the document referenced in a given release is itself a sufficient basis on which to conclude that the Port has failed to prove anything as a matter of law. While the majority contends that Zachry failed to make these arguments, it is the Port’s burden to show exactly what the “releases” released, in order to prevail on its point of error. The evidence presented at trial does not support the Port’s claim as to what was released. To illustrate why this is so, I will address the specific releases at issue.

a. Release No. 23

I begin by examining the release cited by the majority as an example. Release No. 23 provides as follows:

ZCC hereby acknowledges and certifies that Port of Houston Authority (PHA) has made partial payment to ZCC on all sums owing on Payment Estimate Number Twenty-[T]hree (23) and that it has no further claims against PHA for the portion of the Work completed and listed on the Schedule of Costs in Payment Number Twenty-[T]hree (23).

This release was signed May 17, 2006.

The majority contends that the language “it has no further claims against PHA” is a release. See majority opinion, ante at 855. But what exactly has been released? The agreement identifies such claims only as the claims “for the portion of the Work completed and listed on the Schedule of Costs in Payment Estimate Number Twenty–Three (23).” In order to know what was released you must refer to the Schedule of Costs in Payment Estimate Number Twenty–Three.

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estimate 23)....” As the majority notes, the Payment estimate and schedule of costs were to be prepared by Zachry under the contract. The referenced numbers in the jury charge refer to different copies of the same document. The documents that follow these exhibit numbers differ from one another. DX1114 is a 14–page document starting with DX1114.001 and ending at DX1114.014. It does not include “Payment Estimate Number Twenty-[T]hree (23).” PX884 is a 307–page document, starting with PX884.0001 and ending with PX884.0307. It also does not include “Payment Estimate Number Twenty-[T]hree (23).” It instead includes three copies of Payment Estimate Number Twenty–Two, and then jumps to Payment Estimate Number Twenty–Four.

There is one document, PX884.0145, that might be Payment Estimate Number Twenty–Three. Although the first page states “Estimate 22,” the second page states “Estimate 23.” Without knowing exactly what document is referenced in the release, how could that release be unambiguous?

That Estimate contains both typed and handwritten notations. There was no testimony as to who prepared the handwritten notations, or when those notations were made, or whether those notations were communicated to Zachry. The typed document has a stated date of March 25, 2006. At the bottom of the page there is a typed reference to “LIQ. DAMAGES (C + M)” and the number $0.00 is typed in. “C” is listed above as “Previous Liquidated Damages” with a “$0.00” notation. “M” is listed as “Liquidated Damages this period” and the typed “$0.00” is crossed out and the number “820,000” has been written by hand. The document appears to contain the signature of Andy Thiess for the Port and the handwritten date of April 17, 2006. At the bottom of the last page of that estimate there is a handwritten notation “-(820,000) Feb. + March LD’s.”

*870 The majority puts together a letter written by the Port dated May 10, 20062 and Release No. 23 to somehow link the liquidated-damages deduction with the release. But, the release in question does not mention this letter at all, and the letter itself does not refer to Payment Estimate Number Twenty–Three. The notation at the bottom can hardly be considered an unambiguous description of the Port’s liquidated-damages claim, especially without any testimony that this was even sent to Zachry. Again, this can only raise an ambiguity that the jury resolved against the Port.

2 While the majority in footnote 10 contends that other versions of the release may violate the parol evidence rule, they somehow consider this letter as affirmative evidence as to what was released.

b. Release No. 24

Release No. 24, signed June 7, 2006, suffers from some of the same problems. The jury was told to decide the meaning of “DX1115.017 and PX884.0168 (re Payment Estimate 24).” DX1115 does not contain Payment Estimate Number 24. PX884 appears to contain Payment Estimate 24, but at page 884.0154. That Estimate contains both typed and handwritten notations. There was no testimony as to who prepared the handwritten notations, when those notations were made, or whether those notations were communicated to Zachry. The top of the typed document has a stated date of April 10, 2006. At the bottom of the page there is a typed reference to “LIQ. DAMAGES (C + M)” and the number “$0.00” is typed in. The typed number has been crossed out and the number 600,0003 is handwritten above it. The “C” line above for previous liquidated damages has the typed amount “$0.00,” but on the “M” line, the typed amount “$0.00” has been crossed out and replaced with the handwritten figure, “820,000.” The document appears to contain the signature of Andy Thiess for the Port and the handwritten date of May 10, 2006.

3 This number does not match the majority’s chart.

All of the remaining releases suffer from the same problems. For the releases that contained handwritten notations, there was no testimony as to who prepared the handwritten notations, when those notations were made, or whether those notations were communicated to Zachry. Each release listed below was in the jury charge but did not have the appropriate payment estimate attached, and there was no testimony that the documents that I am referencing below were in fact the appropriate payment estimate.

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c. Release No. 25, dated July 24, 2006

Release No. 25 refers to Payment Estimate No. 25, which I will assume is PX884.0163. It was prepared June 7, 2006 and apparently approved by Thiess on June 16, 2006. The first page contains the typed notation “LIQ. DAMAGES (C + M) $0.00.” Both the “C” line and the “M” line above contain the typed amount “$0.00.” These were not crossed out.

d. Release No. 26, dated August 21, 2006

Release No. 26 refers to Payment Estimate No. 26, which I will assume is PX884.0172. It was prepared July 24, 2006. It does not show an approval date by Thiess. The first page contains the typed notation “LIQ. DAMAGES (C + M) $0.00.” Both the “C” line and the “M” line above contain the typed number “$0.00.” These were not crossed out.

e. Release No. 27, dated September 22, 2006

Release No. 27 refers to Payment Estimate No. 27, which I will assume is *871 PX884.0180. It was prepared August 21, 2006. It was apparently approved by Thiess on October 9, 2006. The first page contains the typed notation “LIQ. DAMAGES (C + M) $0.00.” Both the “C” line and the “M” line above contain the typed number “$0.00.” These were not crossed out individually, although a line is drawn through the entire summary.

f. Release No. 28, dated October 23, 2006

Release No. 28 refers to Payment Estimate No. 28, which I will assume is PX884.0188. It was prepared September 22, 2006. It apparently was approved by Thiess on October 9, 2006. The first page contains the typed notation “LIQ. DAMAGES (C + M) $0.00.” The “$0.00” has been crossed out and the number 2,585,291.804 has been written by hand. The “C” line contains the typed number figure “$0.00,” which is not crossed out, but the number 2,175,291.80 has been handwritten next to it. The “M” line contains the figure “$0.00,” which has been crossed out and the number 410,0005 has been written by hand.

4 This number does not match what the Port claimed were the withheld liquidated damages and does not match the majority’s chart as to when the liquidated damages were actually deducted from Zachry’s payments.

5 This number does not match the chart by the majority.

g. Release No. 29, dated November 20, 2006

Release No. 29 refers to Payment Estimate No. 29, which I will assume is PX884.0197. It was prepared October 23, 2006. It shows no approval by Thiess. The first page contains the typed notation “LIQ. DAMAGES (C + M) $0.00.” Both the “C” line and the “M” line above contain the typed number “$0.00.” These were not crossed out.

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h. Release No. 30, dated December 15, 2006

Release No. 30 refers to Payment Estimate No. 30, which I will assume is PX884.0207. It was prepared November 20, 2006. It apparently was approved by Thiess on November 30, 2006. The first page contains the typed notation “LIQ. DAMAGES (C + M) $0.00.” The “$0.00” has been crossed out and the number 155,000 has been written by hand. The “C” line contains the typed figure “$0.00,” which is not crossed out, while the “M” line contains the typed number “$0.00” with a handwritten number of 155,000 inserted.

i. Release No. 31, dated January 31, 2007

Release No. 31 refers to Payment Estimate No. 31, which I will assume is PX884.0217. It was prepared December 15, 2006. It apparently was approved by Thiess on January 1, 2007. The first page contains the typed notation “LIQ. DAMAGES (C + M) $0.00.” This is not crossed out. The “C” line above contains the typed amount “$0.00,” and it has not been crossed out. The “M” line contains the typed amount “$0.00,” but that has been crossed out and the handwritten number 150,000 inserted.

It appears that every time Zachry sent its payment estimate, it listed “$0.00” in the blank for liquidated damages. On this record, we do not know whether the referenced payment estimate that was listed in the release was Zachry’s estimate—with zero liquidated damages—or the Port’s estimates with its handwritten notations. On this record, the Port cannot prevail as a matter of law.

*872 If the handwritten notations were made by Port personnel to refer to the liquidated damages in question here, then the Port was very inconsistent in its treatment of the liquidated damages. On some documents, the Port approved a listing of “$0.00” on Line “C” for “previous liquidated damages,” even though the Port had withheld previous liquidated damages. Because the documents do not conclusively establish that a release occurred, I would not hold that a release occurred as a matter of law.

The majority’s chart also cannot be supported by the actual releases themselves. Assuming that the handwritten notations indicated a liquidated-damages deduction, those handwritten numbers do not match the amounts that the majority believes were the actual deductions from Zachry’s invoices.

Finally, even assuming that the document included a reference to the Port’s handwritten notations, the actual release says it has no further claims with respect to the Schedule of Costs in the Payment Estimate—in other words, that Zachry has no further claim that the work done cost any more than was listed in its Schedule of Costs for the work done that month. Zachry cannot later contend that the work cost more than listed on the Schedule. The release does not say that Zachry is to be bound by any summary or deductions made by the Port, or that Zachry agrees that the deductions made by the Port are correct. Thus, the releases violate the fundamental rule that they must mention the claim to be released—it is simply missing from the evidence at trial. Under this evidence, we do not know what amount, if any, was allegedly released. While the majority contends that the release does not have to identify the amount released, how else could the majority conclude that a release of $2.205 million occurred as a matter of law?

3. Section 6.07 of the contract supports a release of liens only.

Both sides cite to the contract to support their claims. Section 6.07 of the contract states in pertinent part as follows:

As a condition precedent to the obligation of the Port Authority to make payment on any invoice, the Contractor shall supply the Port Authority with waivers and releases of liens (including without limitation all mechanics’ and materialmens’ liens and any other type of security interest), which

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 31

Port of Houston Authority of Harris County v. Zachry Const. Corp., 377 S.W.3d 841 (2012)

waivers and releases shall be duly executed and acknowledged by the Contractor and each Subcontractor and Supplier expecting payment from [the] Contractor in respect of such invoice in order to assure an effective release of such liens to the maximum extent permitted by Applicable Law. The waivers and releases of liens shall provide, at a minimum, that all amounts due and payable to the Contractor and each such Subcontractor and Supplier, as of the date of such invoice and as of the date of the last payment received by the Contractor and each such Subcontractor and Supplier have been paid in full and that the Contractor and each such Subcontractor and Supplier waives, releases and relinquishes any lien (including without limitation any mechanic’s or materialman’s lien), security interest and claim for payment to the extent set out the preceding sentence.

I agree with Zachry’s interpretation of this section that the two sentences show an intent to release liens and not a release of a claim that payment had been made in full. The second sentence limits the release to the preceding sentence which is clearly limited to liens. Even the majority concedes that this section only required Zachry to release a lien. See majority opinion, ante at 857. But then the majority uses that against Zachry when it discusses *873 the title of the release forms, noting that Release Form No. 1 was a broad release yet was titled “Partial Release of Lien.” Section 6.07 shows the parties’ intent to release liens in connection with this Release Form No. 2.

4. The titles and deletions in the various forms show a limited release.

The different forms of the release show an intent by Zachry to provide a very limited release. The deletion of the broad-form release language that was present in Release Form No. 1 shows Zachry’s intent to limit its release. The fact that the Port was ultimately unhappy with Release Form No. 2 indicates that the Port knew that this release did not provide them any protection at all. See Hous. Exploration Co., 352 S.W.3d at 470–71 (deletions in a contract can be considered in its construction). While not controlling, a document’s title also can create ambiguity. See Lone Star Cement Corp., 467 S.W.2d at 404–05. Here, however, the titles of the documents match up with the contract provision calling only for a release of lien.

5. This release violates the general rules of construction for a release.

Under general rules of contract construction, this release is, at most, ambiguous. But when the specific rules of construction concerning releases are incorporated into the analysis, the release fails. To effectively release a claim in Texas, the releasing instrument must mention the claim to be released. See Victoria Bank, 811 S.W.2d at 938. The releases here do not do this. Releases must be construed narrowly, see id., yet here, the majority expands the releases’ meaning. And unlike typical releases, the releases in this case do not use language that the parties “release, discharge, [and] relinquish” their claims. Cf. Derr Constr. Co., 846 S.W.2d at 859 (“Release language is generally ‘release, discharge, relinquish.’ ”); MG Bldg. Materials, Ltd. v. Moses Lopez Custom Homes, Inc., 179 S.W.3d 51, 64 (Tex.App.-San Antonio 2005, pet. denied) (same); Wallerstein v. Spirt, 8 S.W.3d 774, 780 (Tex.App.-Austin 1999, no pet.) (same). Despite footnote 9, the majority is unable to cite any majority opinion in which the court construed a document to be a release where the document lacked such typical release language. See also Green Int’l, 951 S.W.2d at 387 (contract language that “Contractor shall not be liable to the Subcontractor for delay to Subcontractor’s work by the act, neglect or default of Owner” is not a release because it neither extinguishes a claim nor establishes an absolute bar to any right of action on the released matter).

For all of these reasons I respectfully dissent from the majority’s opinion as to the release of the liquidated damages claim.

End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

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TAB 3

Zachry Construction Corporation v.

Port of Houston Authority of Harris County, 449 S.W.3d 98 (Tex. 2014).

Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

449 S.W.3d 98 Supreme Court of Texas.

ZACHRY CONSTRUCTION CORPORATION, Petitioner, v.

PORT OF HOUSTON AUTHORITY OF HARRIS COUNTY, Texas, Respondent.

No. 12–0772. | Argued Nov. 6, 2013. | Decided Aug. 29, 2014. | Rehearing Denied Dec. 19, 2014.

Synopsis Background: Construction contractor brought action against county port authority for breach of contract. The 151st District Court, Harris County, No. 2006–72970, Mike Engelhart, J., entered judgment on jury verdict for contractor. Port authority and contractor appealed. The Houston Court of Appeals, Sharon McCally, J., 377 S.W.3d 841, reversed and rendered judgment for the port. Contractor sought review.

Holdings: The Supreme Court, Hecht, C.J., held that: [1]

local Government Contract Claims Act does not waive immunity from suit on a claim for damages not recoverable under section of Act that defines the scope of the waiver of immunity; [2]

Act waives immunity for a contract claim for delay damages not expressly provided for in the contract;

[3]

no-damages-for-delay provision was unenforceable;

[4]

releases signed by contractor did not cover contractor’s breach of contract claims; and [5]

evidence was sufficient to support verdict that port authority was entitled to an offset of $970,000 as damages for contractor’s use of defective wharf fenders.

Reversed and remanded.

Boyd, J., dissented in part and filed opinion in which Johnson, Willett, and Lehrmann, JJ., joined.

West Headnotes (16)

[1]

Courts Acts and proceedings without jurisdiction Municipal Corporations Capacity to sue or be sued in general

Governmental immunity implicates a court’s subject-matter jurisdiction over pending claims, and, without jurisdiction, the court cannot proceed at all in any cause; it may not assume jurisdiction for the purpose of deciding the merits of the case.

1 Cases that cite this headnote

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Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

[2]

Public Contracts Defenses

Local Government Contract Claims Act does not waive immunity from suit on a claim for damages not recoverable under sections of the Act that define the scope of the waiver of immunity. V.T.C.A., Local Government Code § 271.153.

2 Cases that cite this headnote

[3]

Public Contracts Remedies of Contractors Water Law Contracts

Local Government Contract Claims Act applied to contract between construction contractor and county port authority for construction of a wharf. V.T.C.A., Local Government Code § 271.152.

Cases that cite this headnote

[4]

Statutes Particular Words and Phrases

As a rule, a modifier like “subject to” applies to the nearest reasonable referent in the statute.

Cases that cite this headnote

[5]

Public Contracts Defenses

Local Government Contract Claims Act waives immunity for contract claims that meet certain conditions: the existence of a specific type of contract, a demand for certain kinds of damages, a state forum, etc. V.T.C.A., Local Government Code §§ 271.151–271.160.

Cases that cite this headnote

[6]

Public Contracts Defenses

The waiver of immunity in Local Government Contract Claims Act for contract claims that meet certain conditions does not depend on the outcome, though it does require a showing of a substantial claim that meets the Act’s conditions. V.T.C.A., Local Government Code §§ 271.151–271.160.

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Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

1 Cases that cite this headnote

[7]

Public Contracts Pleading

For a claim to be “substantial,” as required to meet pleading requirements for claim brought under Local Government Contract Claims Act, the claimant must plead facts with some evidentiary support that constitute a claim for which immunity is waived, not that the claimant will prevail. Tex. Loc. Gov’t Code §§ 271.151–160.

1 Cases that cite this headnote

[8]

Public Contracts Delay of government and liability for damages

Local Government Contract Claims Act waives immunity for a contract claim for delay damages not expressly provided for in the contract. V.T.C.A., Local Government Code § 271.153.

1 Cases that cite this headnote

[9]

Damages Natural and Probable Consequences of Breaches of Contract Damages Under circumstances within contemplation of parties

“Under the contract” is used to refer generally to damages available on a contract claim; further, parties entering into a contract presumably contemplate that contract damages will be available if that contract is breached.

1 Cases that cite this headnote

[10]

Damages Proximate or Remote Consequences

“Consequential damages” are those damages that result naturally, but not necessarily, from the defendant’s wrongful acts.

Cases that cite this headnote

[11]

Damages Under circumstances within contemplation of parties

Delay damages are consequential damages.

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Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

Cases that cite this headnote

[12]

Public Contracts Delay of government and liability for damages

Generally, under Local Government Contract Claims Act, a contractor has a right to delay damages for breach of contract; the parties are free to modify or exclude it by agreement, but unless they do, the right provided by law is as much a part of the contract as the rights the contract expressly creates. V.T.C.A., Local Government Code § 271.153.

2 Cases that cite this headnote

[13]

Public Contracts Delay of government and liability for damages Water Law Contracts

No-damages-for-delay provision in contract between construction contractor and county port authority for construction of wharf was unenforceable; pre-injury waivers of future contract liability were void as against public policy. V.T.C.A., Local Government Code § 271.153.

Cases that cite this headnote

[14]

Contracts Freedom of contract Contracts Contravention of law in general Contracts Public Policy in General

Freedom of contract has limits; as a rule, parties have the right to contract as they see fit, as long as their agreement does not violate the law or public policy.

Cases that cite this headnote

[15]

Public Contracts Delay of government and liability for damages Water Law Contracts

Releases signed by construction contractor releasing claims against port authority for the work completed in order for contractor to obtain periodic payments did not cover contractor’s breach of contract claims against port authority on the basis that port authority’s refused to allow contractor to construct cutoff wall, which resulted in the contractor having to do more work in the wet, thereby delaying completion and increasing its costs, where forms were captioned “Affidavit and Partial Release of Lien,” plainly referred only to claims for work completed, not for liquidated damages withheld for delays due to work not completed, and contractor disputed the port authority’s right to withhold liquidated damages from the first time it did so.

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Cases that cite this headnote

[16]

Public Contracts Damages Water Law Contracts

Evidence was sufficient to support verdict that port authority was entitled to an offset of $970,000 as damages for contractor’s use of defective wharf fenders, where port authority submitted evidence that the fenders, which were supposed to last for 30 years, became corroded after only 90 days, and expert testified that this occurred because the fenders were improperly sealed, which testimony was corroborated by lab analysis and tests.

1 Cases that cite this headnote

Attorneys and Law Firms

*100 R. Wes Johnson, The Gardner Law Firm, San Antonio, TX, for Amicus Curiae, Associated Builders and Contractors of Texas.

Joe F. Canterbury Jr., Canterbury Stuber Elder Gooch, Surratt, Shapiro & Stein P.C., Dallas, TX, for Amicus Curiae, Associated General Contractors of Texas, Inc.

James Corbin Van Arsdale, Vice President & General Counsel, Austin, TX, for Amicus Curiae, Associated General Contractors–Texas Building Branch.

Robert H. Fugate, Assistant City Attorney, Arlington City Attorney’s Office, Arlington, TX, for Amicus Curiae, City of Arlington, Texas.

Charles Steven Estee, Office of the Dallas City Attorney, Dallas, TX, Amicus Curiae, City of Dallas, Texas.

Christopher Bedford Mosley, Sr. Assistant City Attorney, Fort Worth, for Amicus Curiae, City of Fort Worth, Texas.

Malinda York Crouch, Sr. Assistant City Attorney, Houston, TX, for Amicus Curiae, City of Houston.

Robert Caput, DFW Airport, TX, for Amicus Curiae, Dallas/Fort Worth International Airport Board.

Vincent L. Marable III, Paul Webb, P.C., Wharton, TX, for Amicus Curiae, Electrical Contractors Association, National Systems Contractors Association.

Bruce S. Powers, Assistant County Attorney, Vincent Reed Ryan Jr., Houston, TX, for Amicus Curiae, Harris County, Texas.

Hugh Rice Kelly, Austin, TX, for Amicus Curiae, Texans for Lawsuit Reform.

Jose E. De La Fuente, Lloyd Gosselink Rochelle & Townsend, P.C., Austin, TX, for Amicus Curiae, Texas Aggregates and Concrete Association.

George S. Christian, Texas Civil Justice League, Austin, TX, for Amicus Curiae, Texas Civil Justice League.

John B. Dahill, Austin, TX, for Amicus Curiae, Texas Conference of Urban Counties.

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Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

Heather Mahurin, Austin, TX, for Amicus Curiae, Texas Municipal League.

Richard Gary Thomas, Thomas Feldman & Wilshusen, LLP, Dallas, TX, for Amicus Curiae, The American Subcontractors Association, Inc.

David A. Escamilla, Sherine Elizabeth Thomas, Austin, TX, for Amicus Curiae, Travis County, Texas.

Michael Keeley, Dallas, TX, for Amicus Curiae, Zurich Surety.

*101 Amanda Bowman Nathan, Sydney Gibbs Ballesteros, Robin C. Gibbs, Michael Absmeier, Jennifer Horan Greer, Gibbs & Bruns LLP, Brandon Trent Allen, Reynolds, Frizzell, Black, Doyle, Allen & Oldham, L.L.P., Houston, TX, Douglas W. Alexander, Alexander Dubose Jefferson & Townsend LLP, Austin, TX, for Petitioner Zachry Construction Corporation.

David E. Keltner, Marianne M. Auld, Kelly Hart & Hallman LLP, Fort Worth, TX, Catherine B. Smith, Michael A. Heidler, Marie R. Yeates, William D. Sims Jr., Vinson & Elkins LLP, David Hurst Brown, Brown & Kornegay, LLP, Karen Tucker White, Karen T. White, P.C., Lawrence J. Fossi, Fossi & Jewell LLP, Houston, TX, for Respondent Port of Houston Authority of Harris County, Texas.

Opinion

Chief Justice HECHT delivered the opinion of the Court, in which Justice GREEN, Justice GUZMAN, Justice DEVINE, and Justice BROWN joined.

The common law permits a contractor to recover damages for construction delays caused by the owner, but the parties are free to contract differently. A contractor may agree to excuse the owner from liability for delay damages, even when the owner is at fault. The contractor thereby assumes the risk of delay from, say, an owner’s change of plans, even if the owner is negligent. But can a no-damages-for-delay provision shield the owner from liability for deliberately and wrongfully interfering with the contractor’s work? Before this case, a majority of American jurisdictions—including Texas courts of appeals, courts in all but one jurisdiction to consider the issue, and five state legislatures—had answered no. We agree with this overwhelming view and also conclude that the answer is the same if the owner is a local governmental entity for which immunity from suit is waived by the Local Government Contract Claims Act.1

1 TEX. LOC. GOV’T CODEE §§ 271.151–.160.

Contractors are usually paid as work progresses and, in exchange for payment, must waive liens and claims related to the work paid for. But does such a general waiver release a claim the contractor has already asserted? Not, we think, unless the claim is specifically mentioned or the intent to do so is clear.

Our conclusions require us to reverse the judgment of the court of appeals2 and remand the case to that court for further proceedings.

2 377 S.W.3d 841 (Tex.App.-Houston [14th Dist.] 2012).

I3 3 The evidence in this case was hotly disputed at almost every turn. We do not pause in this rehearsal of the proceedings to note each disagreement. In reviewing any case tried to a jury, we must view the evidence “in the light most favorable to the verdict”—in this case a verdict for the petitioner—“crediting favorable evidence if reasonable jurors could, and disregarding contrary evidence unless reasonable jurors could not” and so summarize the evidence in that light. Cruz v. Andrews Restoration, Inc., 364 S.W.3d 817, 819 (Tex.2012) (citing City of Keller v. Wilson, 168 S.W.3d 802, 807 (Tex.2005)).

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Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

Petitioner, Zachry Construction Corporation, contracted to construct a wharf on the Bayport Ship Channel for respondent, the Port of Houston Authority of Harris County, Texas. The wharf would be a concrete deck supported by piers, extending out over the water. It would be used for loading and unloading ships carrying containerized goods and would be long enough—1,660 feet—for two ships to dock stern to bow. It would be built in five sections, each 135 feet wide and 332 feet long. The channel was to be dredged to a *102 depth of 40 feet beneath the wharf and surrounding area, and revetment placed along the shore beneath the wharf to prevent erosion. The total cost was $62,485,733.

The contract made Zachry an independent contractor in sole charge of choosing the manner in which the work would be conducted. Specifically, Section 5.10 of the contract provided:

The Port Authority shall not have the right to control the manner in which or prescribe the method by which the Contractor [Zachry] performs the Work. As an independent Contractor, the Contractor shall be solely responsible for supervision of and performance of the Work and shall prosecute the Work at such time and seasons, in such order or precedence, and in such manner, using such methods as Contractor shall choose....

The provision benefitted the Port, insulating it from the liability to which it would be exposed were it exercising control over Zachry’s work.4 Still, the Port was fully engaged in reviewing Zachry’s plans and overseeing construction.

4 See, e.g., Gen. Elec. Co. v. Moritz, 257 S.W.3d 211, 214 (Tex.2008) (“Generally, an owner or occupier does not owe a duty to ensure that independent contractors perform their work in a safe manner. But one who retains a right to control the contractor’s work may be held liable for negligence in exercising that right.”) (citations omitted).

Zachry’s plan was innovative. It would use soil dredged from the channel to construct an 8–foot–wide earthen berm starting from the shore at either end of the worksite, extending out toward the center of the channel, then running parallel to the shore, forming a long, flat U-shaped wall in the channel around the construction area. Zachry would install a refrigerated pipe system in the wall and down into the channel floor that would carry supercooled brine, freezing the wall to make it impenetrable to the water in the channel. Zachry would then remove the water from the area between the wall and the shore. In this way, Zachry could work “in the dry”, using bulldozers and other land equipment for the excavation and revetment work. Another advantage to this freeze-wall approach was that it would lower diesel emissions and require fewer nitrous oxide credits under environmental laws, giving the Port more flexibility in other construction projects. Zachry believed this approach would make the work less expensive and allow it to be completed more quickly.

And time was of the essence to the Port. Work began in June 2004 and was to be completed in two years. But two sections of the wharf had to be completed within 20 months—by February 2006—so that a ship from China could dock, delivering cranes to be used on the wharf. Zachry agreed to pay $20,000 per day as liquidated damages for missing the deadlines.

Nine months into the project, the Port realized that it would need two 1,000–foot berths to accommodate the ships it ultimately expected to service. A sixth 332–foot section would have to be added to the wharf. As a practical matter, only Zachry could perform the additional work, and Zachry and the Port began discussions on a change order. To complete the two sections of the wharf needed by February 2006, and to continue to work “in the dry”, Zachry proposed to build another freeze-wall—a cutoff wall—though the middle of the project, perpendicular to the shoreline out to the existing wall, splitting the project into two parts. Zachry would finish the west end where the ship from China would dock, remove the wall barricading water from that area, then continue working on the east end “in the dry”.

*103 The Port had reservations about this plan. Near the shore, the cutoff wall would have to be built through the area where piers had already been driven into the channel floor. The Port’s engineers were concerned that freezing the ground near the piers might destabilize them, weakening the wharf and making it unsafe. But the Port was also concerned that if it rejected Zachry’s plan, Zachry might simply refuse to undertake the addition of a sixth section. So the Port did not raise its concerns with Zachry. Zachry, for its part, had already identified the issue, but its own engineers had concluded that any piers that might be affected could be insulated from the frozen ground. Change Order 4, using Zachry’s approach to add a sixth section of the wharf at a cost of $12,962,800, was finalized September 27, 2005.

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Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

Two weeks later, the Port ordered Zachry to revise and resubmit its plans without the cutoff wall. The practical effect of the Port’s order was to refuse to allow construction of the cutoff wall. Zachry protested that, under Section 5.10 of the contract, the Port had no right to determine the method and manner of the work, but the Port would not budge. Zachry’s only option was to finish the westmost sections in time for the ship from China to dock, then remove the wall altogether and continue to work “in the wet”, which would delay completion of the project and increase its cost.

In negotiating Change Order 4, the Port had promised not to impose liquidated damages for delay as long as the ship from China could dock when it arrived, though the Port had refused to put its promise in writing. Nevertheless, after the ship successfully docked, the Port began withholding liquidated damages from Zachry’s payments. Eventually the Port desisted, but not until it had withheld $2.36 million. Zachry completed the project in January 2009, more than two-and-one-half years after the contract deadline.

In November 2006, several weeks after the Port refused to allow construction of the cutoff wall, Zachry sued. Zachry eventually claimed some $30 million in damages from delays caused by the Port. The Port countered that Section 5.07 of the contract precluded delay damages. That provision states:

[Zachry] shall receive no financial compensation for delay or hindrance to the Work. In no event shall the Port Authority be liable to [Zachry] or any Subcontractor or Supplier, any other person or any surety for or any employee or agent of any of them, for any damages arising out of or associated with any delay or hindrance to the Work, regardless of the source of the delay or hindrance, including events of Force Majeure, AND EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM, ARISES OUT OF OR IS DUE, IN WHOLE OR IN PART, TO THE NEGLIGENCE, BREACH OF CONTRACT OR OTHER FAULT OF THE PORT AUTHORITY. [Zachry’s] sole remedy in any such case shall be an extension of time.

Zachry argued, and the trial court ultimately agreed, that such a no-delay-damages provision could not be enforced if the Port’s intentional misconduct caused the delay.

Zachry also sought recovery of the $2.36 million in delay damages withheld by the Port. The trial court held that the contract’s liquidated damages provisions were invalid, and the Port has not challenged that ruling on appeal. But the Port responded that Zachry’s claim to the liquidated damages was precluded by the releases it executed to obtain the periodic payments from which liquidated damages were withheld. The releases shared language stating:

*104 [Zachry] hereby acknowledges and certifies that [the Port] has made partial payment to [Zachry] on all sums owing on Payment Estimate Number [–––] and that it has no further claims against [the Port] for the portion of the Work completed and listed on the Schedule of Costs in Payment Estimate Number [–––].5 The trial court concluded that this language did not unambiguously release Zachry’s claim to the liquidated damages withheld and asked the jury to decide what effect it had.

5 There are releases in other forms, at least one of which specifically acknowledged, and excluded any effect on, contract claims at issue in pending litigation between the parties. The release for Payment Estimate Number 35 provided that the parties agreed “that Zachry Construction Corporation’s execution of this Lien Release ... does not in any way release or modify the parties’ rights and obligations under the Phase 1A Wharf and Dredging Contract or constitute a release of any claim or claims that the parties may present in the Lawsuit with respect to Phase 1A Wharf and Dredging Contract.”

After a three-month trial, the jury found that the Port breached the contract by rejecting Zachry’s cutoff wall design, causing Zachry to incur $18,602,697 in delay damages.6 The jury also found that the delay “was the result of the Port’s ... arbitrary and capricious conduct, active interference, bad faith and/or fraud.”7 The jury failed to find that Zachry had released its claim to the $2.36 million liquidated damages the Port withheld, but found that the Port was entitled to offset $970,000 for defective wharf fenders. The trial court rendered judgment for Zachry on the verdict.

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Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

6 The jury was asked to find damages for “[t]he balance due and owed by the Port, if any, under the Contract, including any amount owed as compensation for any increased cost to perform the work as a direct result of Port-caused delays, and ... [t]he amount owed, if any, for additional work that Zachry was directed to perform by the Port in connection with the Contract.” The jury found that the percentage of damages for hindrance or delay, as opposed to additional work, was 58.13%. The Port and Zachry have since stipulated that 100% of the damages found by the jury were for hindrance or delay.

7 In assessing damages, the jury was instructed as follows:

You are instructed that § 5.07 of the Contract precludes Zachry from recovering delay or hindrance damages, if any, unless you find that the delay or hindrance damages, if any, resulted from a delay or hindrance that was the result of the Port’s actions, if any, that constituted arbitrary and capricious conduct, active interference, bad faith and/or fraud. “Arbitrary and capricious” means willful and unreasoning action without due consideration and in disregard of the facts, circumstances, and rights of other parties involved. “Active interference” means affirmative, willful action that unreasonably interferes with the other party’s compliance with the contract. “Active interference” requires more than a simple mistake, error in judgment, lack of total effort, or lack of complete diligence. “Bad faith” is conscious doing of a wrong for a dishonest purpose. “Fraud” occurs when 1. a party makes a material misrepresentation, 2. the misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth and as a positive assertion, 3. the misrepresentation is made with the intention that it should be acted on by the other party, and 4. the other party suffers injury as a result of its reliance on the misrepresentation. “Misrepresentation” means a promise of future performance made with an intent, at the time the promise was made, not to perform as promised, and the promise of future performance is that the Port would comply with the terms of Change Order 4.

Both the Port and Zachry appealed. The court of appeals held that the no- *105 delay-damages provision of the contract barred Zachry’s recovery of delay damages,8 that Zachry unambiguously released its claims to $2.205 million of the liquidated damages withheld,9 and that the Port was entitled to the $970,000 found by the jury for defective wharf fenders.10 The court reversed the judgment for Zachry and rendered judgment for the Port, awarding it the $10,697,750 in attorney fees found by the jury.11

8 377 S.W.3d 841, 850–851 (Tex.App.-Houston [14th Dist.] 2012).

9 Id. at 857–858. The court was divided on this issue.

10 Id. at 861. Since the $155,000 in liquidated damages to which Zachry had not released its claim was completely offset by the $970,000 for the defective fenders, Zachry recovered nothing.

11 Id. at 865. Section 3.10 of the contracts states: “If [Zachry] brings any claim against the Port Authority and [Zachry] does not prevail with respect to such claim, [Zachry] shall be liable for all attorneys’ fees incurred by the Port Authority as a result of such claim.”

We granted Zachry’s petition for review.12

12 56 Tex. Sup.Ct. J. 864 (Aug. 23, 2014).

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Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

II

[1]

Zachry argues that the no-damages-for-delay provision of the contract (Section 5.07) is invalid. The Port disagrees but also argues that even if the provision has no effect, the contract is otherwise silent on the recovery of delay damages, and the Local Government Contract Claims Act (“the Act”)13 does not waive governmental immunity from suit for any recovery a contract does not itself provide for. The court of appeals concluded that the no-damages-for-delay provision is enforceable and thus found it unnecessary to reach the immunity issue.14 That approach was impermissible. Immunity “implicates a court’s subject-matter jurisdiction over pending claims”,15 and “ ‘[w]ithout jurisdiction the court cannot proceed at all in any cause; it may not assume jurisdiction for the purpose of deciding the merits of the case.’ ”16 We must consider first whether the Act waives a local governmental entity’s immunity from suit on a contract claim for delay damages the contract does not call for.

13 Tex. Loc. Gov’t Code §§ 271.151–.160.

14 377 S.W.3d at 865 n. 25. The Port asserted governmental immunity in the trial court but did not request a ruling.

15 Rusk State Hosp. v. Black, 392 S.W.3d 88, 95 (Tex.2012).

16 Fin. Comm’n of Tex. v. Norwood, 418 S.W.3d 566, 578 (Tex.2013) (quoting Sinochem Int’l Co. v. Malaysia Int’l Shipping Corp., 549 U.S. 422, 431, 127 S.Ct. 1184, 167 L.Ed.2d 15 (2007) (internal quotation marks omitted) (citing Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998))).

The issue has two parts. One is whether the Act’s limitations on recovery help define and restrict the scope of the waiver of immunity. If not, those limitations have no role in determining a court’s jurisdiction over a claim.17 If so, as we conclude, the second part of the immunity issue is whether the delay damages Zachry seeks are permitted by the Act, so that the *106 Port’s immunity from suit is waived. We conclude they are.

17 The effect of the Act’s limitations on recovery is important, though not in this case, in responding to a governmental entity’s plea to the jurisdiction, the ruling on which is subject to interlocutory appeal. TEX. CIV. PRAC. & REM.CODE § 51.014(a)(8). If the limitations do not determine the scope of the waiver of immunity, an assertion of a claim on a contract covered by the Act would be enough to defeat the jurisdictional plea. Otherwise, a plaintiff would also be required to show that the damages claimed are permitted by the Act.

A

The Act waives immunity from contract suits for local governmental entities, such as the Port.18 Section 271.152 of the [2] [3]

Act states:

18 The Act defines a “local governmental entity” as “a political subdivision of this state, other than a county or a unit of state government [as that term is defined elsewhere],” “including a ... special-purpose district or authority, including any ... navigation

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district....” TEX. LOC. GOV’T CODEE § 271.151(3). The Port—known until 1971 as the Harris County Houston Ship Channel Navigation District—is a navigation district created in 1927 under the authority of article XVI, section 59 of the Texas Constitution, with the authority to sue and be sued. Guillory v. Port of Houston Auth., 845 S.W.2d 812, 812–813 (Tex.1993); see also Jones v. Texas Gulf Sulphur Co., 397 S.W.2d 304, 306–307 (Tex.Civ.App.-Houston 1965, writ ref’d n.r.e.) (concluding in part that the Houston Ship Channel’s immunity from tort liability was not waived by a “sue and be sued” clause). In 1970, the Court held that the same “sue and be sued” clause waived a navigation district’s governmental immunity from suit. Mo. Pac. R.R. Co. v. Brownsville Navigation Dist., 453 S.W.2d 812 (Tex.1970). The Port would then have been subject to suit, and possible contract liability, until the Missouri Pacific decision was overruled in Tooke v. City of Mexia, 197 S.W.3d 325, 328–331 (Tex.2006).

A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter.19 19 TEX. LOC. GOV’T CODEE § 271.152 (emphasis added).

A “contract subject to this subchapter” includes “a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity”.20 The contract between the Port and Zachry qualifies.

20 Id. § 271.151(2)(A).

The “terms and condition of this subchapter” referred to in Section 271.152 are found in the Act’s other nine sections. Section 271.153 states:

(a) Except as provided by Subsection (c), the total amount of money awarded in an adjudication brought against a local governmental entity for breach of a contract subject to this subchapter is limited to the following:

(1) the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration;

(2) the amount owed for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract;

(3) reasonable and necessary attorney’s fees that are equitable and just; and

(4) interest as allowed by law, including interest as calculated under Chapter 2251, Government Code.

(b) Damages awarded in an adjudication brought against a local governmental entity arising under a contract subject to this subchapter may not include:

(1) consequential damages, except as expressly allowed under Subsection (a)(1);

(2) exemplary damages; or

*107 (3) damages for unabsorbed home office overhead. (c) Actual damages, specific performance, or injunctive relief may be granted in an adjudication brought against a local governmental entity for breach of a contract described by Section 271.151(2)(B).21

21 Id. § 271.153.

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Section 271.154 provides for enforcement of contractual adjudication procedures.22 Section 271.155 preserves defenses other than immunity.23 Section 271.156 limits the Act’s waiver of immunity to suits filed in state court.24 Section 271.157 makes clear that the waiver of immunity does not extend to tort claims.25 Section 271.158 provides that the Act only waives immunity and does not grant it.26 And Section 271.160 precludes a finding of joint enterprise.27

22 Id. § 271.154 (“Adjudication procedures, including requirements for serving notices or engaging in alternative dispute resolution proceedings before bringing a suit or an arbitration proceeding, that are stated in the contract subject to this subchapter or that are established by the local governmental entity and expressly incorporated into the contract or incorporated by reference are enforceable except to the extent those procedures conflict with the terms of this subchapter.”).

23 Id. § 271.155 (“This subchapter does not waive a defense or a limitation on damages available to a party to a contract, other than a bar against suit based on sovereign immunity.”).

24 Id. § 271.156 (“This subchapter does not waive sovereign immunity to suit in federal court.”).

25 Id. § 271.157 (“This subchapter does not waive sovereign immunity to suit for a cause of action for a negligent or intentional tort.”).

26 Id. § 271.158 (“Nothing in this subchapter shall constitute a grant of immunity to suit to a local governmental entity.”).

27 Id. § 271.160 (“A contract entered into by a local government entity is not a joint enterprise for liability purposes.”).

[4]

Whether the various provisions of the Act define the scope of the waiver of immunity depends on the statutory text. As a rule, a modifier like the last “subject to” phrase in Section 271.152 applies to the nearest reasonable referent.28 The candidates are “contract”, “claim”, “adjudicating”, and “waives”. We do not think the phrase modifies “contract”. Earlier in the sentence, the Act is made applicable to any “contract subject to this subchapter”, and it would be needlessly redundant to reiterate a few words later that the contract is subject to the Act’s terms and conditions.29 Nor do we think the phrase modifies “claim”. Section 271.158,30 for example, provides only that the Act does not grant immunity and says nothing about the nature of the claim for which immunity is waived. And we do not think the “subject to” phrase modifies “adjudicating”. If it did, only the adjudicatory process would be governed by the Act’s terms and conditions. This reading might make sense for the recovery limits and preservation of procedures and defenses provided in Sections 271.153,31 271.154,32 and Section 271.155,33 respectively. Those three sections relate to the litigation and adjudication *108 of a claim. But the other four sections, limiting the Act’s coverage to suits in state court on contract claims, providing that immunity is not granted, and precluding a finding of joint enterprise, have little, if anything, to do with the adjudication on claims. These sections—271.156,34 271.157,35 271.158,36 and 271.160,37 respectively—relate to the scope of immunity rather than the conduct of litigation.

28 See ANTONIN SCALIA & BRYAN A. GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 152 (2012).

29 Sultan v. Mathew, 178 S.W.3d 747, 751 (Tex.2005) (“We must avoid, when possible, treating statutory language as surplusage.”).

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30 TEX. LOC. GOV’T CODEE § 271.158.

31 TEX. LOC. GOV’T CODEE § 271.153.

32 Id. § 271.154.

33 Id. § 271.155.

34 Id. § 271.156.

35 Id. § 271.157.

36 Id. § 271.158.

37 Id. § 271.160.

The “subject to the terms and conditions” phrase in Section 271.152 incorporates the other provisions of the Act to define the scope of its waiver of immunity. The waiver does not extend to tort suits, suits in federal court, or allow recovery beyond that permitted by Section 271.153. But Section 271.152, as qualified by this “subject to” phrase also does not preclude other defenses or other contractual procedures, or confer immunity or suggest joint enterprise. The “subject to” phrase most reasonably refers to “waives”, thus making the provisions of the Act limitations on the waiver of immunity. Section 271.152 must be read as follows: “A local governmental entity ... waives sovereign immunity to suit ... subject to the terms and conditions” of the Act.

We reached this result in Tooke v. City of Mexia38 without the analysis just laid out because it seemed obvious. The Tookes sued the City of Mexia for breach of contract, “asserting that they had relied on a three-year term in purchasing equipment. They claimed unspecified damages, but requested jury findings only on lost profits and attorney fees”.39 They did not claim that the City failed to pay for work actually performed; rather, they sought recovery only for lost profits they would have made had the contract continued—“consequential damages excluded from recovery under [Section 271.153].”40 Even though the Tookes’ contract claim fell within Section 271.152,41 we concluded—because they did not “claim damages within [Section 271.153’s] limitations”—that “the City’s immunity from suit on the Tookes’ claim has not been waived.”42 This was true even though the Tookes might have proved that the City breached the contract.

38 197 S.W.3d 325 (Tex.2006).

39 Id. at 330.

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40 Id. at 346.

41 Id. at 329–330.

42 Id. at 346.

The text of Section 271.152 and our decision in Tooke ought to have settled the matter, but courts of appeals have read our decision in Kirby Lake Development, Ltd. v. Clear Lake City Water Authority43 to retreat from Tooke. There, developers sued an area water authority for reimbursement of part of their costs of building water and sewer facilities, which the authority had agreed to pay out of voter-approved bond funds.44 No bonds had been approved, but the developers claimed that the water authority had breached the contract by campaigning against approval, thereby forestalling its reimbursement obligation.45 The water authority argued in *109 part that because no bonds had been approved, its obligation to reimburse the developers had not been triggered, nothing was “due and owed” under Section 271.153(a)(1), and for that reason, immunity was not waived.46 In other words, because there was no liability, there were no recoverable damages and, therefore, no waiver of immunity. But the premise—no liability—was disputed, and if the water authority had breached the contract by opposing bond approval, then the developers claimed only the reimbursement under the contract as damages. And such damages, we held, were “due and owed” under Section 271.153(a)(1).47 “The purpose of section 271.153,” we explained, “is to limit the amount due by a governmental agency on a contract once liability has been established, not to foreclose the determination of whether liability exists.”48 We did not suggest that Section 271.153 permits a waiver of immunity from suit for a claim for damages this Section prohibits altogether. The developers argued that they had damages recoverable under Section 273.153;49 they did not address, and we did not consider, whether immunity would have been waived for their claim of breach even if they sought only damages not recoverable under Section 271.153. We would not have engaged in such an analysis without acknowledging the conflict with our opinion in Tooke.50

43 320 S.W.3d 829 (Tex.2010).

44 Id. at 833–834.

45 Id. at 834 (re 2006 bond election); see also Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 321 S.W.3d 1, 5 (Tex.App.— Houston [14th Dist.] 2008) (“Kirby III ”) (re 1998 elections), aff’d, 320 S.W.3d at 843–844.

46 320 S.W.3d at 839–840; Brief of Respondent Clear Lake City Water Authority at 38 (No. 08–1003).

47 320 S.W.3d at 839–840.

48 Id. at 840.

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49 320 S.W.3d 829, passim; Reply Brief of Petitioners Kirby Lake Development, Ltd., et al. at 11–14.

50 In Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 412–413 (Tex.2011), Sharyland contracted to build a water-supply system for the City of Alton. Sharyland sued the City for breach, claiming damages for injury to its system caused by contractors engaged by the City under another contract to build a sanitary sewer system. We concluded that while the claim was covered by Section 271.152 and was therefore one for which immunity was waived, the damages sought had nothing to do with the contract between Sharyland and the City and thus were “not a ‘balance due and owed’ under that contract” recoverable under Section 271.153. Id. at 413. As in Kirby Lake, however, the issue whether Section 271.153 is jurisdictional did not arise, and we did not consider it.

The Austin Court of Appeals has laid out the case for confining the scope of the Act’s waiver to Section 271.152 in its [5] [6]

opinion in City of San Antonio v. Lower Colorado River Authority.51 LCRA reasons that immunity from suit and immunity from liability are distinct concepts, that the former may be waived for a claim on which a governmental entity is not liable, and that the Act serves this very purpose.52 We agree with all but the conclusion. As we have explained, Section 271.153’s limitations on recovery are incorporated into Section 271.152 by its last “subject to” clause and are thereby conditions on the Act’s waiver of immunity. We disagree with LCRA that this reading of the Act makes its waiver of immunity dependent on ultimate liability. The Act waives immunity for contract claims that meet certain conditions: the existence of a specific type of contract, a demand for certain kinds of damages, a state forum, etc. The waiver does not depend on the outcome, though it does require a showing of a substantial claim that meets the Act’s conditions. LCRA argues that this view of the Act makes Section 271.153 a grant of immunity, a construction precluded by *110 Section 271.158. But again, Section 271.153 does not add immunity that Section 271.152 takes away; Section 271.152 uses Section 271.153 to further define to what extent immunity has been waived.

51 369 S.W.3d 231 (Tex.App.-Austin 2011, no pet.).

52 369 S.W.3d at 235–238.

[7]

By “substantial” claim we mean, as we held in Texas Department of Parks and Wildlife v. Miranda, that the claimant must plead facts with some evidentiary support that constitute a claim for which immunity is waived, not that the claimant will prevail.53 In Tooke, the only damages claimed were precluded by Section 271.153, and therefore immunity was not waived. Had the Tookes claimed payment for work done, immunity would have been waived, regardless of whether the Tookes could prevail, as long as the Tookes had some supporting evidence.

53 133 S.W.3d 217, 226–228 (Tex.2004) (“When a plea to the jurisdiction challenges the pleadings, we determine if the pleader has alleged facts that affirmatively demonstrate the court’s jurisdiction to hear the cause. We construe the pleadings liberally in favor of the plaintiffs and look to the pleaders’ intent. If ... the issue is one of pleading sufficiency [ ] the plaintiffs should be afforded the opportunity to amend [unless] the pleadings affirmatively negate the existence of jurisdiction.... However, if a plea to the jurisdiction challenges the existence of jurisdictional facts, we consider relevant evidence submitted by the parties when necessary to resolve the jurisdictional issues raised.... If the evidence creates a fact question ... the trial court cannot grant the plea to the jurisdiction, and the fact issue will be resolved by the fact finder.” (citations omitted)).

We conclude that the Act does not waive immunity from suit on a claim for damages not recoverable under Section 271.153.54

54 We disapprove the following cases to the extent they are to the contrary: Santa Rosa Indep. Sch. Dist. v. Rigney Const. & Dev., LLC, No. 13–12–00627–CV, 2013 WL 2949566, at *5 (Tex.App.-Corpus Christi June 13, 2013, pet. denied) (mem.op.); Roma Ind. Sch. Dist. v. Ewing Const. Co., No. 04–12–00035–CV, 2012 WL 3025927, at *4 (Tex.App.-San Antonio July 25, 2012, pet.

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denied) (mem.op.); Corpus Christi Indep. Sch. Dist. v. TL Mech., No. 13–11–00624–CV, 2012 WL 1073299, at *3 (Tex.App.-Corpus Christi Mar. 29, 2012, pet. denied) (mem.op.) (note, however, that the court noted that plaintiff sought only contract damage and expressly did not claim any amount for lost profits); City of San Antonio ex rel. San Antonio Water Sys. v. Lower Co. River Auth., 369 S.W.3d at 236–238; City of N. Richland Hills v. Home Town Urban Partners, Ltd., 340 S.W.3d 900, 909–910 (Tex.App.-Fort Worth 2011, no pet.); Jones v. City of Dallas, 310 S.W.3d 523, 527–528 (Tex.App.-Dallas 2010, pet. denied) (note, however, that the court addressed an additional issue arising because the contract specifically provided for “lost profits” damages); Clear Lake City Water Auth. v. MCR Corp., No. 01–08–00955–CV, 2010 WL 1053057, *10–11, (Tex.App.-Houston [1st Dist.] Mar. 11, 2010, pet. denied) (mem.op.); Dallas Area Rapid Transit v. Monroe Shop Partners, Ltd., 293 S.W.3d 839, 842 (Tex.App.-Dallas 2009, pet. denied) (note, however, that there was a dispute over whether there was a “balance due and owed”); City of Houston v. S. Elec. Servs., Inc., 273 S.W.3d 739, 744 (Tex.App.-Houston [1st Dist.] 2008, pet. denied) (note, however, that there was a dispute over whether the “balance due and owed” would include increased labor costs); City of Mesquite v. PKG Contracting, Inc., 263 S.W.3d 444, 448 (Tex.App.-Dallas 2008, pet. denied) (note, however, that the court pointed out that the record did not establish that the claim was solely for damages excluded by the statute, and cited Tooke ).

B

[8]

Under Section 271.153(a)(1), the “amount of money awarded ... for breach of contract” includes “the balance due and owed ... under the contract” as amended, “including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays”.55 Section 271.153(b) precludes recovery of consequential damages, “except as expressly allowed under Subsection *111 (a)(1)”.56 The Port contends that no balance can be due and owed under a contract unless the contract expressly calls for payment.

55 TEX. LOC. GOV’T CODEE § 271.153(a)(1).

56 Id. § 271.153(b).

No such requirement can be found in the statute’s text. The phrase, “balance due and owed/owing”, is not defined in the Act, and the Legislature has not used it except in three other statutes waiving governmental immunity, where it is also undefined: the State Contract Claims Act,57 the County Contract Claims Act,58 and the State Agency Contract Claims Act.59 The word “due” simply means “owing or payable”60 and “owing” means “unpaid”.61 A “balance due and owed ... under the contract” is simply the amount of damages for breach of contract payable and unpaid. Direct damages for breach—“the necessary and usual result of the defendant’s wrongful act”62—certainly qualify.

57 TEX. GOV’T CODE § 2260.003(a) (“The total amount of money recoverable on a claim for breach of contract under this chapter may not ... exceed an amount equal to the sum of: (1) the balance due and owing on the contract price; (2) the amount or fair market value of orders or requests for additional work made by a unit of state government to the extent that the orders or requests for additional work were actually performed; and (3) any delay or labor-related expense incurred by the contractor as a result of an action of or a failure to act by the unit of state government or a party acting under the supervision or control of the unit of state government.”).

58 TEX. LOC. GOV’T CODEE § 262.007(b) (“The total amount of money recoverable from a county on a claim for breach of the contract is limited to the following: (1) the balance due and owed by the county under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration; (2) the amount owed for change orders or additional work required to carry out the contract; (3) reasonable and necessary attorney’s fees that are equitable and just; and (4) interest as allowed by law.”).

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59 TEX. CIV. PRAC. & REM.CODE § 114.004(a) (“The total amount of money awarded in an adjudication brought against a state agency for breach of an express provision of a contract subject to this chapter is limited to the following: (1) the balance due and owed by the state agency under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration if the contract expressly provides for that compensation; (2) the amount owed for written change orders; (3) reasonable and necessary attorney’s fees based on an hourly rate that are equitable and just if the contract expressly provides that recovery of attorney’s fees is available to all parties to the contract; and (4) interest at the rate specified by the contract or, if a rate is not specified, the rate for postjudgment interest under Section 304.003(c), Finance Code, but not to exceed 10 percent.”).

60 See BLACK’S LAW DICTIONARY 609 (10th ed.2014).

61 Id. at 1279.

62 Basic Capital Mgmt. v. Dynex Commercial, Inc., 348 S.W.3d 894, 901 (Tex.2011) (“Consequential damages are those damages that result naturally, but not necessarily, from the defendant’s wrongful acts. They are not recoverable unless the parties contemplated at the time they made the contract that such damages would be a probable result of the breach. Thus, to be recoverable, consequential damages must be foreseeable and directly traceable to the wrongful act and result from it.”) (quoting Stuart v. Bayless, 964 S.W.2d 920, 921 (Tex.1998) (per curiam)).

Section 271.153(a)(1) does not require the “balance due and owed ... under the contract” to be ascertainable from the contract because, for one thing, this Section expressly includes “any amount owed as compensation ... for owner-caused delays”, an amount which cannot be determined in advance, when the contract is executed. To “include” means “[t]o contain *112 as a part of something.”63 “[A]mount[s] owed as compensation for ... owner-caused delays”, allowed by Subsection (a)(1), are consequential damages that are recoverable by law, not merely contractual right.64 Delay damages can be a “balance due and owed” only if that phrase is not limited to amounts stated in the contract.65

63 See BLACK’S LAW DICTIONARY at 880; Chickasaw Nation v. United States, 534 U.S. 84, 89, 122 S.Ct. 528, 151 L.Ed.2d 474 (2001) (“To ‘include’ is to ‘contain’ or ‘comprise as part of a whole.’ WEBSTER’S NINTH NEW COLLEGIATE DICTIONARY 609 (1985).”).

64 See Jensen Constr. Co. v. Dallas Cnty., 920 S.W.2d 761, 770 (Tex.App.-Dallas 1996, writ denied) (“Generally, a contractor is entitled to recover damages for losses due to delay and hindrance of work if the contractor proves: (1) its work was delayed or hindered; (2) it suffered damages because of the delay or hindrance; and (3) the owner of the project was responsible for the act or omission which caused the delay or hindrance. However, no damage for delay provisions may preclude recovery of delay damages by the contractor.” (citations and internal quotation marks omitted)), overruled in part on other grounds by Travis Cnty. v. Pelzel & Assocs., Inc., 77 S.W.3d 246, 251 (Tex.2002); Beaumont v. Excavators & Constructors, Inc., 870 S.W.2d 123, 132–134 (Tex.App.-Beaumont 1993, writ denied); Indus. Constr. Mgmt. v. DeSoto Indep. Sch. Dist., 785 S.W.2d 160, 162 (Tex.App.-Dallas 1989, no writ); Shintech Inc. v. Group Constructors, Inc., 688 S.W.2d 144, 148 (Tex.App.-Houston [14th Dist.] 1985, no writ); City of Houston v. R.F. Ball Constr. Co., Inc., 570 S.W.2d 75, 77 (Tex.Civ.App.-Houston [14th Dist.] 1978, writ ref’d n.r.e.); Housing Auth. of Dallas v. Hubbell, 325 S.W.2d 880, 884–885, 890–891 (Tex.Civ.App.-Dallas 1959, writ ref’d n.r.e.) (holding NDFD clause did not bar delay damages found to have been caused by owner arbitrarily and capriciously-defined as “willful and unreasoning action without due consideration and in disregard of the facts, circumstances, and the rights of other parties involved”-even though NDFD clause barred delay damages “from any cause”); U.S. ex rel. Wallace v. Flintco, 143 F.3d 955, 964–965 (5th Cir.1998) (holding NDFD clause did not preclude recovery of delay damages caused by owner’s active interference with the contractor’s performance, without considering impact of NDFD language); see generally P.V. Smith, Annotation, Right of Building or Construction Contractor to Recover Damages Resulting from Delay Caused by Default of Contractee, 115 A.L.R. 65 (1938).

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65 The dissent argues that because an amount cannot be “due and owed” unless it is “provided for or contemplated in” the contract, delay damages, which are expressly included in Section 271.153(a)(1), must also be “provided for or contemplated in” the contract. Post at 113. If the premise were true, then the conclusion would follow. “A including B” usually means that A is the larger group. But the dissent’s “provided for or contemplated in” limitation simply is not in or suggested by the text. The “including” phrase proves the flaw in the dissent’s position: “any amount as compensation for ... delay damages” (emphasis added), which amount may or may not be provided for in the contract, cannot be included in “the balance due and owed ... under the contract” if that phrase is limited to amounts provided for in the contract. Of course, “any Texas city, including Athens”, to use the dissent’s example, is limited to one, but the example, like the dissent’s statutory construction, assumes a limitation to Texas cities when that is the very issue in dispute. A more apt example is “a city, including any named Athens”, which is a longer list.

[9]

Furthermore, Section 271.153(b) excludes from the “[d]amages awarded ... under a contract” consequential damages except as allowed in Subsection (a)(1). If the latter provision limited recovery to amounts stated in the contract, Subsection (b) would be surplusage: a claimant could recover all amounts stated in the contract, and all consequential damages stated in the contract. Read together, Subsections (a)(1) and (b) allow recovery of contract damages, including delay damages, but excluding other consequential damages. Nothing in the rest of Section 271.153 suggests that recoverable damages must be stated in the contract.66

66 The dissent argues that damages “under” a contract are only those “provided for or contemplated in” the contract, but “under the contract” is used to refer generally to damages available on a contract claim. See, e.g., CVN Group, Inc. v. Delgado, 95 S.W.3d 234, 244 (Tex.2002) (referring to “liability for money damages under the contract”); Great Am. Ins. Co. v. N. Austin Mun. Util. Dist. No. 1, 950 S.W.2d 371, 373 (Tex.1997) (referring to the need for “extrinsic evidence ... to calculate damages under the contract”). Further, parties entering into a contract presumably contemplate that contract damages will be available if that contract is breached. See City of Houston v. Williams, 353 S.W.3d 128, 141 (2011) (“[I]t is ‘settled that the laws which subsist at the time and place of the making of a contract ... form a part of it, as if they were expressly referred to or incorporated in its terms.’ ”) (suit by retired firefighters based in part on city ordinances could be characterized as one for breach of contract under Section 271.152); Wessely Energy Corp. v. Jennings, 736 S.W.2d 624, 626 (Tex.1987) (“The law[ ] existing at the time a contract is made becomes a part of the contract and governs the transaction.”); Kerr v. Galloway, 94 Tex. 641, 64 S.W. 858, 860 (1901) (“Under a familiar rule, frequently announced, the law enters into the contract, and becomes a part of it.”); see also Hardware Dealers Mut. Ins. Co. v. Berglund, 393 S.W.2d 309, 315 (Tex.1965) (“Contracting parties generally select a judicially construed clause with the intention of adopting the meaning which the courts have given to it.”). The dissent argues that limiting recovery to contractual damages is no limit at all, but damages are but one item in a list that includes attorney fees and interest, even if not provided for in the contract. The dissent argues that allowing recovery of contractual damages under Section 271.153(a)(1) renders subsection (2) superfluous, but the latter provision clarifies that change orders can be the basis for recovery, even if it were argued that they were not “under the contract”.

*113 In support of its argument, the Port cites two sentences from the remarks made by the bill sponsor introducing the Local Government Contract Claims Act during a House committee hearing. But we have repeatedly held that “[s]tatements made during the legislative process by individual legislators or even a unanimous legislative chamber are not evidence of the collective intent of the majorities of both legislative chambers that enacted a statute.”67 The Port also cites our opinion in Kirby Lake, where we stated that the reimbursement obligation stated in the contract was “due and owed”.68 But we did not analyze the phrase, and we certainly did not suggest that damages not set out in the contract cannot be “due and owed”.69

67 Molinet v. Kimbrell, 356 S.W.3d 407, 414 (Tex.2011); accord In re Allcat Claims Serv., L.P., 356 S.W.3d 455, 466–467 (Tex.2011); Robinson v. Crown Cork & Seal Co., Inc., 335 S.W.3d 126, 191–192 (Tex.2010) (Wainwright, J., dissenting); AT&T Commc’ns of Tex., L.P. v. Sw. Bell Tel. Co., 186 S.W.3d 517, 528–529 (Tex.2006); Gen. Chem. Corp. v. De La Lastra, 852 S.W.2d 916, 923 (Tex.1993).

68 Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 840 (Tex.2010).

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69 The dissent also relies on Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407 (Tex.2011), for its argument that recoverable damages must be “provided for or contemplated in” the contract. In that case a city contracted for construction of a water supply system, and later the contractor sued for the cost of remediating injury to the system caused by the city’s sewer contractors. Id. at 410–411. We concluded that the damages sought “were not those provided for or contemplated in the Water Supply Agreement and [were] not a ‘balance due and owed’ under that contract. Nor [were] these costs the ‘direct result of owner-caused delays or acceleration....’ ” Id. at 413. The dissent argues that the phrase, “provided for or contemplated in”, was really intended to be a standard for determining whether an amount is “due and owed ... under” a contract. But the Court clearly gave two independent reasons for concluding that the claimed damages were not recoverable: they were not “provided for or contemplated in” the contract, “and” they were not “due and owed under” the contract. Sharyland’s claimed damages were not a “balance due and owed” because they were completely unrelated to the Water Supply Agreement. And by adding, “nor” were the damages for delay, referencing the “including” phrase in Section 157.053(a)(1), we suggested that if the damages had been for delay, they would have been recoverable even if neither “due and owed under” nor “provided for or contemplated in” the contract. We treated the “including” phrase in the statutory provision as stating independently that delay damages are recoverable. Instead of supporting the dissent, Sharyland contradicts it.

*114 [10] [11] [12] More than half a century ago, we observed that “[t]he universal rule for measuring damages for the breach of a contract is just compensation for the loss or damage actually sustained.”70 While the Legislature clearly intended to limit the recovery of consequential damages on contract claims permitted by the Act,71 nothing in the Act suggests that the Legislature intended to create a unique and somehow limited standard for measuring direct damages for breach of contract. Generally, a contractor has a right to delay damages for breach of contract. The parties are free to modify or exclude it by agreement, but unless they do, the right provided by law is as much a part of the contract as the rights the contract expressly creates.72

70 Stewart v. Basey, 150 Tex. 666, 245 S.W.2d 484, 486 (1952).

71 “Consequential damages are those damages that result naturally, but not necessarily, from the defendant’s wrongful acts.” Basic Capital Mgmt. v. Dynex Commercial, Inc., 348 S.W.3d 894, 901 (Tex.2011); El Paso Mktg., L.P. v. Wolf Hollow I, L.P., 383 S.W.3d 138, 144 (Tex.2012). Delay damages are consequential damages.

72 See supra note 66.

We conclude that the Local Government Contract Claims Act waives immunity for a contract claim for delay damages not expressly provided for in the contract.73 We now turn to whether Zachry’s claim is barred by the no-damages-for-delay provision of the contract.

73 The dissent notes that the State Agency Contract Claims Act, enacted in 2013, contains a provision similar to Section 271.153(a)(1) except that the “including” phrase permits recovery of delay damages only “if the contract expressly provides for that compensation”. TEX. CIV. PRAC. & REM. CODE § 114.004(a)(1) (Act of May 26, 2013, 83rd Leg., R.S., ch. 1260, H.B. 586, § 1, http://www.legis.state.tx.us/tlodocs/83 R/billtext/pdf/HB00586F.pdf# navpanes= 0 (last visited August 25, 2014)). The dissent argues that the proviso states what is implicit in Section 271.153(a)(1). But if anything, the addition of the proviso suggests that it was not intended in the other three statutes waiving immunity from suit on contract claims.

It should also be noted that the State Contract Claims Act was amended in 2005 (Act of May 27, 2005, 79th Leg., R.S., ch. 988, H.B.1940, § 1, 2005 Tex. Gen. Laws 3292), the same year the Local Government Contract Claims Act was adopted (Act of May 23, 2005, 79th Leg., R.S., ch. 604, H.B.2039, § 1, 2005 Tex. Gen. Laws 1548), to provide for recovery of delay damages, but did so using the word “and” instead of “including”. Supra note 59. Using the dissent’s argument, one might contend that both statutes intended that delay damages be recoverable whether or not provided for by contract.

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III

[13]

We held in Green International, Inc. v. Solis that a contractor may generally agree to assume the risk of construction delays and not seek damages.74 But we noted that the court of appeals in City of Houston v. R.F. Ball Construction Co.75 *115 had listed what it called “generally recognized exceptions” to the enforcement of such agreements

74 951 S.W.2d 384, 387 (Tex.1997).

75 570 S.W.2d 75 (Tex.Civ.App.-Houston [14th Dist.] 1978, writ ref’d n.r.e.); see also Shintech Inc., 688 S.W.2d 144, 148 (Tex.App.-Houston [14th Dist.] 1985, no writ) (“a contractor is entitled to recover damages from an owner for losses due to delay and hindrance of its work if it proves: (1) that its work was delayed or hindered, (2) that it suffered damages because of the delay or hindrance, and (3) that the owner was responsible for the act or omission which caused the delay or hindrance”) (citing R.F. Ball ).

when the delay: (1) was not intended or contemplated by the parties to be within the purview of the provision; (2) resulted from fraud, misrepresentation, or other bad faith on the part of one seeking the benefit of the provision; (3) has extended for such an unreasonable length of time that the party delayed would have been justified in abandoning the contract; or (4) is not within the specifically enumerated delays to which the clause applies.76 76 Green, 951 S.W.2d at 387 (citing Ball, 570 S.W.2d at 77 & n. 1).

And we also noted77 that the court of appeals in Green had identified a fifth exception “based upon active interference” with the contractor “or other wrongful conduct”, including “arbitrary and capricious acts”—“ ‘willful and unreasoning actions,’ ‘without due consideration’ and ‘in disregard of the rights of other parties.’ ”78 The issues in Green did not require us to determine whether the courts of appeals in that case and Ball were correct in their statement of the law. Zachry contends that the second and fifth exceptions apply here.

77 Id. at 388.

78 Argee Corp. v. Solis, 932 S.W.2d 39, 63 (Tex.App.-Beaumont 1995), rev’d on other grounds sub. nom. Green Int’l, Inc. v. Solis, 951 S.W.2d 384 (Tex.1997); Housing Auth. of Dallas v. Hubbell, 325 S.W.2d 880, 891 (Tex.Civ.App.-Dallas 1959, writ ref’d n.r.e.).

The jury found that Zachry’s delay damages resulted from the Port’s “arbitrary and capricious conduct, active interference, bad faith and/or fraud” as those terms were defined in the charge.79 The court of appeals concluded that, assuming such conduct fell within the second exception, the exception could not apply if the parties intended the no-damages-for-delay provision to cover the Port’s conduct.80 The provision stated that Zachry could not recover from the Port “any damages arising out of or associated with any delay or hindrance” to its work, even if due to the Port’s “negligence, breach of contract or other fault”, and that its “sole remedy in any such case” would be “an extension of time.” By “other fault”, the court concluded, the parties intended to include the kind of misconduct by the Port found by the jury in awarding damages.81 “As harsh as this result seems,” the court explained, the parties must be bound by their agreement.82 Rejecting Zachry’s argument that enforcing the no-damages-for-delay provision made the contract illusory, allowing the Port to delay performance in perpetuity with impunity, the court responded simply that it would not deprive the Port of its bargain.83

79 Supra note 7.

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80 377 S.W.3d 841, 850 (Tex.App.-Houston [14th Dist.] 2012).

81 Id. at 850.

82 Id.

83 Id. at 851–852.

As a matter of textual interpretation, it is doubtful whether the rule of ejusdem generis would allow “other fault”, following “negligence” and “breach of contract”, to include the kind of deliberate, wrongful conduct the Port was found by the jury to have engaged in.84 That interpretation is *116 especially doubtful, given the context in which no-damages-for-delay provisions are used. An amicus brief explains:

84 Marks v. St. Luke’s Episcopal Hosp., 319 S.W.3d 658, 663 (Tex.2010) (“[T]he principle of ejusdem generis warns against expansive interpretations of broad language that immediately follows narrow and specific terms, and counsels us to construe the broad in light of the narrow.”); see also ANTONIN SCALIA & BRYAN A. GARNER, READING LAW: THE INTERPRETATION OF LEGAL TEXTS 199 (2012) (“Where general words follow an enumeration of two or more things, they apply only to persons or things of the same general kind or class specifically mentioned”.).

Based on their years of experience, education, and training, [contractors] can assess potential delaying events when estimating and bidding public works. For example, they can make a judgment on the quality and completeness of the plans and specifications, determine potential delays resulting from material shortages, analyze historical weather data for potential delays, and assess possible delays from soil conditions by studying soil testing reports furnished by most owners. However, they cannot assess potential delays that may arise due to an owner’s direct interference, willful acts, negligence, bad faith fraudulent acts, and/or omissions.85 85 Brief of the Associated General Contractors of Texas, Inc. as Amicus Curiae, at 2. In support of Zachry’s petition for review, we received amicus briefs and letters from the Texas Aggregates and Concrete Association; the Texas Civil Justice League; Associated General Contractors of Texas; Texans for Lawsuit Reform; Zurich Surety; Associated Builders and Contractors of Texas; Associated General Contractors—Texas Building Branch; the National Electrical Contractors Association; the National Systems Contractors Association; and the American Subcontractors Association and the American Subcontractors Association of Texas. Amicus briefs in support of the Port have been submitted by The Texas Conference of Urban Counties; the City of Houston; the Texas Municipal League and the Texas City Attorneys Association; Harris County; Travis County; the City of Fort Worth; the City of Arlington; the City of Dallas; and the Dallas/Fort Worth Airport Board.

Regardless, the purpose of the second Ball exception is to preclude a party from insulating himself from liability for his own deliberate, wrongful conduct. [14]

We have indicated that pre-injury waivers of future liability for gross negligence are void as against public policy.86 Generally, a contractual provision “exempting a party from tort liability for harm caused intentionally or recklessly is unenforceable on grounds of public policy.”87 We think the same may be said of contract liability. To conclude otherwise would incentivize wrongful conduct and damage contractual relations. This conclusion is supported by lower court decisions in Texas88 and court decisions in at least 28 American jurisdictions.89 We join this overwhelming consensus. The Port *117 argues that the cases from other jurisdictions are inapposite because those jurisdictions all recognize a party’s duty of good faith in performing a contract, and Texas does not.90 But the law need not impose a duty of good faith on a party to prohibit him from attempting to escape liability for his future, deliberate, wrongful conduct. The Port argues that withholding

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enforcement of a no-damages-for-delay provision is in derogation of freedom of contract. But that freedom has limits. “As a rule, parties have the right to contract as they see fit as long as their agreement does not violate the law or public policy.”91 Enforcing such a provision to allow one party to intentionally injure another with impunity violates the law for the reasons we *118 have explained. The Port also argues that Zachry is a sophisticated party, a very large construction company that can protect itself. But the law’s protection against intentional injury is not limited to the helpless. Finally, the Port argues that the conduct found by the jury does not qualify for the exception. But the jury charge tracked the language of the second and fifth exceptions. The charge correctly described the misconduct that cannot be covered by a no-damages-for-delay provision.

86 Fairfield Ins. Co. v. Stephens Martin Paving, LP, 246 S.W.3d 653, 687 (Tex.2008) (Hecht, J., concurring); Crowell v. Hous. Auth. of Dallas, 495 S.W.2d 887, 889 (Tex.1973); see also Sw. Elec. Power Co. v. Grant, 73 S.W.3d 211, 219–222 (Tex.2002) (suggesting that, generally, a tariff or contract provision including a pre-injury waiver of liability for gross negligence or willful misconduct may be so unreasonable as to violate public policy). Zachry also points out that we have noted that the courts of appeals have “found a pre-injury release of gross negligence invalid as against public policy”. Memorial Med. Ctr. of E. Tex. v. Keszler, 943 S.W.2d 433, 435 (Tex.1997).

87 RESTATEMENT (SECOND) OF CONTRACTS § 195(1) (1981).

88 Argee Corp. & Seaboard Sur. Co. v. Solis, 932 S.W.2d 39, 52–53 (Tex.App.-Beaumont 1995), rev’d on other grounds sub nom. Green Int’l, Inc. v. Solis, 951 S.W.2d 384 (Tex.1997); see also Alamo Cmty. College Dist. v. Browning Constr. Co., 131 S.W.3d 146, 162 (Tex.App.-San Antonio 2004, pet. dism’d by agr.); City of Houston v. R.F. Ball Constr. Co., Inc., 570 S.W.2d 75, 77 (Tex.Civ.App.-Houston [14th Dist.] 1978, writ ref’d n.r.e.); Hous. Auth. of Dallas v. Hubbell, 325 S.W.2d 880, 884–885, 890–891 (Tex.Civ.App.-Dallas 1959, writ ref’d n.r.e.).

89 See, e.g., U.S. Steel Corp. v. Mo. Pac. R., 668 F.2d 435, 438–439 (8th Cir.1982) (Arkansas law); Dynalectric Co. v. Whittenberg Constr. Co., No. 5:06–CV–00208–JHM, 2010 WL 4062787, at *8 (W.D.Ky. Oct. 15, 2010); Law Co. v. Mohawk Const. & Supply Co., Inc., 702 F.Supp.2d 1304, 1325–1327 (D.Kan.2010); Kiewit Constr. Co. v. Capital Elec. Constr. Co., No. 8:04 CV 148, 2005 WL 2563042, at *7–8 (D.Neb. Oct. 12, 2005); Pellerin Constr., Inc. v. Witco Corp., 169 F.Supp.2d 568, 583–587 (E.D.La.2001); RaCON, Inc. v. Tuscaloosa Cnty., 953 So.2d 321, 339–340 (Ala.2006); Tricon Kent Co. v. Lafarge N.A., Inc., 186 P.3d 155, 160–161 (Colo.App.2008); White Oak Corp. v. Dept. of Transp., 217 Conn. 281, 585 A.2d 1199, 1203 (1991); Wilson Contracting Co. v. Justice, No. 508 CIV.A.1974, 1981 WL 377680, at *1–2 (Del.Super.Ct. Jan. 22, 1981); Blake Constr. Co. v. C.J. Coakley Co., 431 A.2d 569, 578–579 (D.C.1981); Newberry Square Dev. Corp. v. S. Landmark, Inc., 578 So.2d 750, 752 (Fla.Dist.Ct.App.1991); MElectric Corp. v. Phil–Gets Int’l Trading Corp., No. CVA12–014, 2012 WL 6738260, at *9–11 (Guam Dec. 27, 2012); Grant Constr. Co. v. Burns, 92 Idaho 408, 443 P.2d 1005, 1012 (1968); J & B Steel Contractors, Inc. v. C. Iber & Sons, Inc., 162 Ill.2d 265, 205 Ill.Dec. 98, 642 N.E.2d 1215, 1222 (1994); Owen Constr. Co. v. Iowa St. Dept. of Transp., 274 N.W.2d 304, 306–307 (Iowa 1979); State Highway Admin. v. Greiner Eng’ng Sciences, 83 Md.App. 621, 577 A.2d 363, 372 (1990); Phoenix Contractors, Inc. v. Gen. Motors Corp., 135 Mich.App. 787, 355 N.W.2d 673, 676–677 (1984); Tupelo Redev. Agency v. Gray Corp., 972 So.2d 495, 511–512 (Miss.2007); J.A. Jones Constr. v. Lehrer McGovern Bovis, Inc., 120 Nev. 277, 89 P.3d 1009, 1014–1016 (2004); Edwin J. Dobson, Jr., Inc. v. State, 218 N.J.Super. 123, 526 A.2d 1150, 1153 (N.J.Super.Ct.App.Div.1987); Corinno Civetta Constr. Corp. v. New York, 67 N.Y.2d 297, 502 N.Y.S.2d 681, 493 N.E.2d 905, 909–910 (1986); Daniel E. Terreri & Sons, Inc. v. Mahoning Cty. Bd. of Comm’rs, 152 Ohio App.3d 95, 786 N.E.2d 921, 928 (2003); Guy M. Cooper, Inc. v. E. Penn Sch. Dist., 903 A.2d 608, 613–614 (Pa.Commw.Ct.2006); Ayers–Hagan–Booth, Inc. v. Cranston Hous. Auth., No. C.A. 74–2897, 1975 WL 174130, at *2–5 (R.I.Super. Nov. 24, 1975); U.S. v. Metric Constructors, Inc., 325 S.C. 129, 480 S.E.2d 447, 448–451 (1997); Thomas & Assoc. v. Metro. Gov’t of Nashville, No. M2001–00757–COA–R3–CV, 2003 WL 21302974, at *14 (Tenn.Ct.App. June 6, 2003); English v. Fischer, 660 S.W.2d 521, 522 (Tex.1983); W. Eng’rs, Inc. v. State Road Comm’n, 20 Utah 2d 294, 437 P.2d 216, 217 (1968); John E. Gregory & Son, Inc. v. A. Guenther & Sons Co., 147 Wis.2d 298, 432 N.W.2d 584, 586 (1988). But see Wes–Julian Constr. Corp. v. Commonwealth, 351 Mass. 588, 223 N.E.2d 72, 76–77 (1967). See generally Maurice T. Bruner, Annotation, Validity and Construction of “No Damage” Clause with Respect to Delay in Building or Construction Contract, 74 A.L.R.3d 187, 201 § 2[a] (1976) (“it is well established, apart from a single jurisdiction, that there are certain exceptions” to NDFD clauses).

90 English v. Fischer, 660 S.W.2d 521, 522 (Tex.1983).

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91 In re Prudential Ins. Co. of Am., 148 S.W.3d 124, 129 (Tex.2004); accord Sonny Arnold, Inc. v. Sentry Sav. Ass’n, 633 S.W.2d 811, 815 (Tex.1982) (recognizing “the parties’ right to contract with regard to their property as they see fit, so long as the contract does not offend public policy and is not illegal”); Curlee v. Walker, 112 Tex. 40, 244 S.W. 497, 498 (1922) (“The law recognizes the right of parties to contract with relation to property as they see fit, provided they do not contravene public policy and their contracts are not otherwise illegal.”); James v. Fulcrod, 5 Tex. 512, 520 (1851) (“That contracts against public policy are void and will not be carried into effect by courts of justice are principles of law too well established to require the support of authorities.”).

Accordingly, we conclude that the no-damages-for-delay provision, Section 5.07 of the parties’ contract, was unenforceable.

IV

Several issues remain.

First: Zachry’s contends that it is entitled to recover the $2.36 million that the Port withheld as liquidated damages for [15]

Zachry’s failure to meet deadlines. For each progress payment, Zachry executed a document entitled “Affidavit and Partial Release of Lien”, which contained the following language:

[Zachry] hereby acknowledges and certifies that [the Port Authority] has made partial payment to [Zachry] on all sums owing on Payment Estimate Number [–––] and that it has no further claims against [the Port Authority] for the portion of the Work completed and listed on the Schedule of Costs in Payment Estimate Number [–––].

Zachry contends that the releases covered only liens. The Port counters that the releases covered all claims for payment. The trial court concluded that the release language was ambiguous on the issue and charged the jury to determine its effect. The jury failed to find that the release language covered Zachry’s claims for liquidated damages withheld by the Port. The court of appeals held that the releases unambiguously covered Zachry’s claim for liquidated damages and reversed.92 We agree that the releases are unambiguous, but we conclude that they do not cover Zachry’s claim.

92 377 S.W.3d 841.

Section 6.07 of the contract conditioned the Port’s obligation to make progress payments on Zachry’s execution of “waivers and releases of liens” providing “that all amounts due and payable” to Zachry and all subcontractors and suppliers “have been paid in full” and that Zachry “waives, releases and relinquishes any lien ..., security interest and claim for payment”. The Port argues that the releases must be construed in light of this requirement because the contract and releases are related contracts and must be read together.93 While Section 6.07 could be read to require Zachry to release its claims for liquidated damages withheld by the Port in order to obtain progress payments, that is not the issue. Had the Port insisted on express language to that effect, and had Zachry refused, the interpretation of Section 6.07 would be important. Now, however, the issue is not what releases Zachry was contractually required to execute, but the effect of the releases Zachry actually did execute.

93 City of Keller v. Wilson, 168 S.W.3d 802, 811 (Tex.2005).

The release forms were captioned “Affidavit and Partial Release of Lien”. In the form language, Zachry acknowledged “partial payment ... on all sums owing” on a specified invoice and stated that it had “no further claims against [the Port] for the portion of the Work completed and listed on” the invoice. The release plainly refers only to claims for work completed,

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not for *119 liquidated damages withheld for delays—work not completed. Furthermore, Zachry actively disputed the Port’s right to withhold liquidated damages from the first time the Port did so, and that dispute was never resolved. The purpose of progress payment releases is to ensure that the contractor will not accept payment for work performed and then insist on additional payment for that work. Zachry’s releases can no more be interpreted to extend to its claim for liquidated damages the Port withheld than to its claim for delay damages. The jury failed to find that the releases in fact covered Zachry’s claim. We agree, as a matter of law.

Second: The trial court did not award Zachry the entirety of the $2.36 million in withheld payments because the jury found that the Port was entitled to an offset of $970,000 as damages for Zachry’s use of defective wharf fenders. Zachry contends that the evidence is legally insufficient to support the jury’s finding.

To prove its claim for the offset, the Port submitted evidence that the wharf fenders, which protect vessels from damage during the mooring process, were supposed to last for 30 years but became corroded after only 90 days. The Port’s expert witness testified that this occurred because the fenders were improperly sealed and, as a result, “the aluminum pores [ ] remain[ed] open [and] filled with sea water.” A lab analysis and tests that a structural fabrication company conducted supported the expert’s conclusion. Zachry contends that the evidence does not establish that it breached the contract because the sealing or coating on the fenders was “thinned” at 25% in accordance with the contract specifications, and if more thinning was required then the blame lies with the specifications and not with Zachry. Even if there were a breach of contract, Zachry argues that the evidence does not establish that the fenders were in fact defective or that the breach caused the damages that the jury awarded. [16]

Viewing the evidence in the light most favorable to the verdict, we cannot agree that the evidence was legally insufficient to support the jury’s verdict. Although Zachry submitted evidence that tended to contradict the Port’s evidence, we conclude that there was “more than a mere scintilla” of evidence on which a reasonable jury could find that Zachry breached its obligation to provide fenders that were supposed to last 30 years by providing fenders that began corroding within 90 days, and that the Port sustained damages in the amount of $970,000 as a result, entitling it to an offset against the damages recovered by Zachry.

Third: The contract provided that “[i]f [Zachry] brings any claim against the Port Authority and [Zachry] does not prevail with respect to such claim, [Zachry] shall be liable for all attorney’s fees incurred by the Port Authority as a result of such claim.” The jury found that the Port incurred $10.5 million in attorney fees as a result of Zachry’s claim for delay damages, plus additional fees on appeal. Separately, the jury found that the Port incurred $80,250 in attorney fees as a result of Zachry’s claim to recover the payments that the Port withheld as liquidated damages, plus additional fees on appeal. In light of our holdings that Zachry prevails on both its claims for delay damages and to recover part of the withheld payments, we reverse the court of appeals’ judgment awarding the Port attorney fees.

******

We hold that Zachry’s claim for delay damages is not barred by immunity or by the no-damages-for-delay provision of the contract. We also hold that Zachry is entitled to recover the liquidated damages *120 withheld by the Port, but that there is evidence to support the jury’s award of an offset. We conclude that the court of appeals erred in awarding the Port attorney fees. We reverse the court of appeals’ judgment, and because the Port has raised a number of other issues, we remand the case to that court for further consideration.

Justice BOYD filed a dissenting opinion, in which Justice JOHNSON, Justice WILLETT, and Justice LEHRMANN joined.

Justice BOYD, joined by Justice JOHNSON, Justice WILLETT, and Justice LEHRMANN, dissenting in part.

Chapter 271 of the Texas Local Government Code waives a local governmental entity’s immunity against suits for breach of written contracts for goods and services, but it does so only to allow contractors to recover “the balance due and owed by the local governmental entity under the contract.” TEX. LOCAL GOV’T CODE § 271.153(a)(1) (emphases added). The Court holds that this waiver allows Zachry Construction Corporation to recover common law delay damages that are not part of

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“the balance due and owed ... under the contract” it entered into with the Port Authority of Houston. In fact, in this contract, Zachry expressly agreed that the Port Authority would never owe damages for costs that Zachry incurred due to any delay or hindrance. The Court invalidates this no-damages-for-delay clause for public policy reasons. But even after striking that clause, the contract does not provide for or in any way contemplate that the Port Authority would pay for Zachry’s delay costs. Because delay costs are not part of “the balance due and owed by [the Port Authority] under [this] contract,” I would hold that Chapter 271 does not waive the Port Authority’s immunity against Zachry’s claim for delay damages, and I would dismiss that claim for lack of jurisdiction. Because governmental immunity bars Zachry’s claim for delay damages, I would not reach the issue of whether the no-damages-for-delay clause is void for public policy reasons. I therefore respectfully dissent in part.1

1 For the reasons the Court explains, I agree with its holding in Part II(A) that section 271.153’s limitation on recoverable damages is jurisdictional because chapter 271 “does not waive immunity from suit on a claim for damages not recoverable under Section 271.153.” Ante at 110. I would not reach the public policy issue in Part III of the Court’s opinion. In Part IV of its opinion, the Court holds that Zachry can recover on its separate claim for $2.36 million that the Port Authority withheld as liquidated damages, less a $970,000 offset for damages resulting from Zachry’s use of defective wharf fenders. Ante at 119. I agree with this portion of the Court’s opinion, for the reasons the Court has explained. The funds that the Port Authority withheld as liquidated damages were part of the monthly progress payments that the Port Authority agreed to make for Zachry’s services and were part of “the balance due and owed ... under the contract.” Section 271.153 thus waives the Port Authority’s immunity against Zachry’s claim to recover those funds, and the courts have jurisdiction to resolve that claim. The mere fact that the Port Authority denies liability on the claim does not negate the statute’s waiver of immunity from suit for damages that are provided for or clearly contemplated under the contract. See TEX. LOCAL GOV’T CODE §§ 271.152–.153.

I.

Governmental Immunity Against Contract Actions

As a local governmental entity, the Port Authority “enjoy[s] governmental immunity from suit, unless immunity is expressly waived.” Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 836 (Tex.2010). Governmental immunity *121 includes both immunity from liability, “which bars enforcement of a judgment against a governmental entity, and immunity from suit, which bars suit against the entity altogether.” Tooke v. City of Mexia, 197 S.W.3d 325, 332 (Tex.2006). A governmental entity that enters into a contract “necessarily waives immunity from liability, voluntarily binding itself like any other party to the terms of agreement, but it does not waive immunity from suit.” Id. Unlike immunity from liability, immunity from suit deprives the courts of jurisdiction and thus completely bars the plaintiff’s claim. Wichita Falls State Hosp. v. Taylor, 106 S.W.3d 692, 696 (Tex.2003).

While most damages awards justly impose the financial consequences of a party’s wrongdoing on the wrongdoer, a damages award against a governmental entity imposes the financial consequences on innocent third parties: taxpayers. Thus, although “[t]he doctrine of governmental immunity arose hundreds of years ago from the idea that ‘the king can do no wrong,’ ... it remains a fundamental principle of Texas law, intended ‘to shield the public from the costs and consequences of improvident actions of their governments.’ ” Lubbock Cnty. Water Control & Improvement Dist. v. Church & Akin, L.L.C., 442 S.W.3d 297, 300 (Tex.2014) (quoting Tooke, 197 S.W.3d at 331–32). In some circumstances, however, justice may demand that the government compensate innocent injured parties even though innocent taxpayers must pay the bill. The challenge is in deciding which circumstances justify a waiver of immunity to allow for such compensation.

Because this decision “requires balancing numerous policy considerations, we have consistently deferred to the Legislature, as the public’s elected representative body, to decide whether and when to waive the government’s immunity.” Lubbock Cnty., 442 S.W.3d at 301. The Legislature may waive the government’s immunity, and thereby “consent to suit[,] by statute or by legislative resolution.” Fed. Sign v. Tex. S. Univ., 951 S.W.2d 401, 405 (Tex.1997). The Legislature has declared that we cannot construe a statute to waive immunity “unless the waiver is effected by clear and unambiguous language.” TEX. GOV’T CODE § 311.034; see also Tooke, 197 S.W.3d at 328–29 (agreeing that statutory waiver of immunity must be “by © 2015 Thomson Reuters. No claim to original U.S. Government Works. 25

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clear and unambiguous language”). If a statute seeks to waive immunity, it “must do so beyond doubt.” Wichita Falls State Hosp., 106 S.W.3d at 697.

For the first 154 years of Texas’ existence, parties who contracted with the government could not recover for the government’s breach unless they first convinced the Legislature to pass a special resolution waiving immunity for their specific claim. See Fed. Sign, 951 S.W.2d at 408 (reaffirming previous holdings that “the State is immune from suit arising from breach of contract suits”); TEX. CIV. PRAC. & REM.CODE §§ 107.001–.005 (governing resolutions granting permission to sue the State). Not surprisingly, this often made it difficult for governmental entities to find qualified contractors who were willing to provide goods and services. In 1999, the Legislature enacted Chapter 2260 of the Texas Government Code, providing an administrative procedure through which parties to certain contracts with a State agency or department could recover damages for the agency’s breach. See TEX. GOV’T CODE §§ 2260.001–.108. Chapter 2260 did not waive the State’s immunity, id. § 2260.006, but instead provided an alternative administrative process through which the contractor could seek relief. See id. The statute provides this option only for parties to certain kinds of contracts, and it limits the administrative award to $250,000 unless the Legislature *122 separately authorizes a higher award in a specific case. See id. § 2260.105.2

2 Under chapter 2260, an administrative law judge can only award up to $250,000 for a valid breach of contract claim. See TEX. GOV’T CODE § 2260.105. Valid claims above $250,000 are referred to the Legislature to decide, in light of appropriate policy considerations, whether to authorize additional funds for payment of the claim. See id. § 2260.1055; Gen. Servs. Comm’n v. Little–Tex Insulation Co., Inc., 39 S.W.3d 591, 596 (Tex.2001).

Although Chapter 2260 provides a limited avenue of relief for those who contract with State agencies and departments,3 it provides no remedy at all for those who contract with a local governmental entity. The Legislature first addressed local governmental entities in 2003, when it enacted a limited waiver of immunity for certain breach of contract suits against Texas counties. See TEX. LOCAL GOV’T CODE § 262.007. Then, in 2005, the Legislature enacted the provisions of Chapter 271 that are at issue in this case, providing the same limited waiver for certain breach of contract suits against all other types of local governmental entities. See id. §§ 271.151–.160. Most recently, in 2013, the Legislature enacted Chapter 114 of the Texas Civil Practice & Remedies Code, providing the same limited waiver of immunity from suits for certain contract claims against State agencies. See TEX. CIV. PRAC. & REM.CODE §§ 114.001–.013.

3 See TEX. GOV’T CODE § 2260.001(4) (defining “unit of state government”).

As it had done in Chapter 2260, the Legislature strictly limited the immunity waivers in Chapters 262, 271, and 114, not only in terms of the types of contracts under which a party can sue, but also in terms of the types and amounts of damages the party can recover. See TEX. LOCAL GOV’T CODE §§ 262.007(b), (c), 271.153; TEX. CIV. PRAC. & REM.CODE § 114.004. Thus, the Legislature has only recently acted to waive immunity for contract claims, and each time it has done so, it has strictly limited the scope of that waiver. Respectful of the Legislature’s prerogative to decide whether, when, and how to waive the State’s immunity, and mindful of our obligation to find waivers only in “clear and unambiguous language” that leaves “no doubt,” we must carefully and strictly construe and apply these statutory limitations. I dissent in this case because the Court’s holding that Zachry’s delay damages are recoverable under section 271.153 ignores the statute’s limitations.

II.

Section 271.153

Section 271.153 is entitled “LIMITATIONS ON ADJUDICATION AWARDS.” Id. § 271.153 (emphasis added).4 Consistent *123 with its title, subsection (a) of section 271.153 identifies three exclusive categories of damages that a contractor can

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recover in a breach of contract suit against a local governmental entity, and subsection (b) lists three categories of damages that contractors cannot recover. See TEX. LOCAL GOV’T CODE § 271.153(a), (b). Specifically, contractors can recover:

4 All references and citations to section 271.153 in this opinion are to the version of the statute applicable to this suit, as it existed before amendments in 2009, 2011, and 2013. See Act of May 20, 2005, 79th Leg., R.S., ch. 604, § 1, 2005 Tex. Gen. Law 1548, 1548–49 (codified at TEX. LOCAL GOV’T CODE § 271.153(a)(1), (2) & (4)). The 2009 amendments added a fourth category of amounts that could be included in the “total amount of money awarded” under subsection (a): “reasonable and necessary attorney’s fees that are equitable and just.” Act of May 21, 2009, 81st Leg., R.S., ch. 1266, § 8, 2009 Tex. Gen. Law 4006, 4007 (codified at TEX. LOCAL GOV’T CODE § 271.153(a)(3)). The 2011 amendments added the phrase “including interest as calculated under Chapter 2251, Government Code” after “interest as allowed by law.” Act of May 17, 2011, 82nd Leg., R.S., ch. 226, § 1, 2011 Tex. Gen. Law 809, 809 (codified at TEX. LOCAL GOV’T CODE § 271.153(a)(4)). And the 2013 amendments created an exception to this limitation on damages, permitting recovery of “[a]ctual damages, specific performance, or injunctive relief” in certain contracts involving the sale or delivery of reclaimed water. Act of May 22, 2013, 83rd Leg., R.S., ch. 1138, § 3, 2013 Tex. Gen. Law ––––, –––– (codified at TEX. LOCAL GOV’T CODE § 271.153(c)). None of these amendments relate to or affect the issue in this case.

(1) the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration;

(2) the amount owed for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract; and

(3) interest as allowed by law.

Id. § 271.153(a) (stating that “total amount of money” recoverable “is limited to” these three categories of damages). Conversely, contractors cannot recover:

(1) consequential damages, except as expressly allowed under Subsection (a)(1);

(2) exemplary damages; or

(3) damages for unabsorbed home office overhead.

Id. § 271.153(b).

The Court holds that subsection (a)(1) authorizes Zachry to recover its delay damages. While I agree that delay damages can be part of “the balance due and owed by [a] local governmental entity under [some ] contract[s],” I do not agree that they are part of “the balance due and owed by [the Port Authority] under [this ] contract.” To the contrary, this contract expressly provided that the Port Authority would have no liability for any delay damages. And while I agree that “the balance due and owed ... under the contract” can include “compensation for ... owner-caused delays,” compensation for owner-caused delays are not part of the balance due and owed under this contract, which stated that the contractor “shall receive no financial compensation for delay or hindrance to the Work ... EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM, ARISES OUT OF OR IS DUE, IN WHOLE OR IN PART, TO THE NEGLIGENCE, BREACH OF THE CONTRACT OR OTHER FAULT OF THE PORT AUTHORITY.”

A. The Balance Due and Owed Under the Contract

Chapter 271 does not define or describe what constitutes “the balance due and owed ... under the contract.” When a statute does not give words a specific definition or technical meaning, we use their common, ordinary meaning. City of Rockwall v. Hughes, 246 S.W.3d 621, 625–26 (Tex.2008). Typically, we look to dictionaries to determine the common meaning of words.5 See Epps v. Fowler, 351 S.W.3d 862, 873 (Tex.2011) (Hecht, J., dissenting) (“The place to look for the ordinary meaning of words is ... a dictionary.”). When a word has multiple common meanings, we give it the meaning most consistent

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with the statutory context *124 in which it is used. State v. $1,760.00 in U.S. Currency, 406 S.W.3d 177, 180–81 (Tex.2013); see also TEX. GOV’T CODE § 311.011(a).

5 See, e.g., Morton v. Nguyen, 412 S.W.3d 506, 512 (Tex.2013); State v. $1,760.00 in U.S. Currency, 406 S.W.3d 177, 181 (Tex.2013); City of Hous. v. Bates, 406 S.W.3d 539, 547 (Tex.2013); In re Nalle Plastics Family Ltd. P’ship, 406 S.W.3d 168, 171–72 (Tex.2013); Tex. Dep’t of Transp. v. Perches, 388 S.W.3d 652, 656 (Tex.2012); Traxler v. Entergy Gulf States, Inc., 376 S.W.3d 742, 747 (Tex.2012).

In the context of payment obligations, the term “balance” means “the difference between the debits and credits of (an account).” BLACK’S LAW DICTIONARY 170 (10th Ed.). The term “due” means (1) “payable; owing; constituting a debt,” when used in relation to a “fact of indebtedness,” or (2) “immediately enforceable,” when used in relation to “the time of payment.” Bryan A. Garner, A DICTIONARY OF MODERN LEGAL USAGE, 298–99 (2nd ed.); see also Black’s Law Dictionary 609 (10th Ed.). The Dictionary of Modern Legal Usage notes that the second definition, “immediately enforceable,” is “almost invariably the applicable one” today. DICTIONARY OF MODERN LEGAL USAGE at 299. And the term “owing” means “[t]hat is yet to be paid; owed; due.” BLACK’S LAW DICTIONARY 1279 (10th Ed.); see also DICTIONARY OF MODERN LEGAL USAGE at 633 (noting that “owed” is the preferred modern usage, over “owing”). The difference between the terms “due” and “owed” is reflected in the fact that something can be owed but not yet due because the date for payment or the contingency on which payment is conditioned has not yet come to pass. See DICTIONARY OF MODERN LEGAL USAGE at 299. A “balance” that is both “due” and “owed” is thus an amount by which an account’s debits exceed its credits that is yet to be paid and immediately enforceable. Stated another way, a balance due and owed is a mature debt. This understanding of the phrase is consistent with both the statutory context, which relates to recoverable monetary obligations under a contract, and with our prior use of the phrase “due and owed” or “due and owing,” both in our construction of this statute and more generally.6

6 See, e.g., Kirby Lake Dev., Ltd. v. Clear Lake City Water Auth., 320 S.W.3d 829, 840 (Tex.2010) (“The existence of a balance ‘due and owed’ is thus incorporated within the contract—a balance that would come due when voters approve payment in a bond election.”); Sw. Bell Tel. Co. v. Mktg. on Hold Inc., 308 S.W.3d 909, 922 (Tex.2010) (“After rigorous analysis, the trial court found that the alleged misrepresentation on each bill—an amount due and owing for a municipal charge—‘is uniform to all members of the class....’ ”); Bailey v. Cherokee Cnty. Appraisal Dist., 862 S.W.2d 581, 587 (Tex.1993) (“There is little question that debts, including ad valorem taxes, that are due and owing by an individual during his lifetime are liabilities of that individual.”) (emphasis omitted); Summers v. Consol. Capital Special Trust, 783 S.W.2d 580, 581 (Tex.1989) (“On October 1, 1983, the Sill note became due and owing.”); Sherman v. First Nat. Bank in Ctr., Tex., 760 S.W.2d 240, 241 (Tex.1988) (“In December of 1981, Sherman received a letter from the Bank demanding the payment of several notes, including the $75,000 real estate note which was not due and owing at that time.”); Inwood N. Homeowners’ Ass’n, Inc. v. Harris, 736 S.W.2d 632, 641 (Tex.1987) (“The developer, or the association, is a general creditor who ... must stand in line along with [other creditors] for payment of sums due and owing.”).

Importantly, section 271.153 modifies the phrase “the balance due and owed” with the prepositional phrase “under the contract.” TEX. LOCAL GOV’T CODE § 271.153(a)(1). Under the “rules of grammar,” see TEX. GOV’T CODE § 311.011, a preposition (here, “under”) imposes a relationship between its object (here, “the contract”) and its antecedent (here, “the balance due and owed”). See, e.g., THE CHICAGO MANUAL OF STYLE § 5.173, at 248 (16th ed.); Bryan A. Garner, THE REDBOOK: A MANUAL ON LEGAL STYLE, 176 (2nd ed.). As a result, section 271.153(a)(1) does not allow recovery of all amounts that may be “due and owed by the local governmental entity,” but instead limits the recovery to a due-and-owed balance that arises “under” the written contract for goods and services *125 to which the statute applies. See TEX. LOCAL GOV’T CODE §§ 271.151(2)(A), 271.153(a)(1). Thus, under section 271.153(a)(1), the amount recoverable “is limited to” the amount of all mature debts owed under a qualified contract, less any credits due.

The Court, by contrast, concludes that “[a] ‘balance due and owed ... under the contract’ is simply the amount of damages for breach of contract payable and unpaid.” Ante at 111. I do not agree that a “balance due and owed ... under a contract” includes all common law damages regardless of whether they are contemplated in the parties’ contract. When a payment is not provided for under the contract, but instead arises under the common law, that payment may later be due and owed under the cort’s jud Aent, MMs not part of “the balance due and owed ... under the contract.” See TEX. LOCAL GOV’T CODE § 271.153(a)(1) (emphasis added).

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The Court’s construction of the statute is contrary to the statute’s language and its structure. First, the Court’s construction separates the phrase “balance due and owed” from the phrase “under the contract,” and then alternatively reads each of them out of the statute. On the one hand, the Court equates the phrase “the balance due and owed” with the phrase “damages ... payable and unpaid,” ante at 111, and by doing so ignores the statute’s actual words. On the other hand, the Court treats the phrase “under the contract” as if it said “under a court’s judgment,” but does so only by relying on court opinions that address damages under a contract, not a “balance due and owed ... under a contract.” Ante at 111 n. 62, 64. We must read the two phrases together, just as they appear in the statute, and the Court’s alternatives for each simply are not equivalents. By equating “the balance due and owed ... under the contract” with “the amount of damages for breach of contract payable and unpaid,” the Court shifts the focus from the mature debt that exists “under the contract” when suit is filed to prospective liability that a Court may impose in a breach of contract action.

Second, by holding that “a ‘balance due and owed ... under the contract’ is simply the amount of damages for breach of contract payable and unpaid,” the Court renders subsection (a)(1) a tautology. Under the Court’s construction, the amount of damages that is recoverable for a breach of contract is “limit [ed]” to the amount of damages that is recoverable for a breach of contract. Under that construction, the amount of damages is not “limit[ed]” at all.7

7 In response, the Court contends that the statute does “limit [ ] recovery” because “damages are but one item in a list that includes attorney’s fees and interest, even if not provided for in the contract.” Ante at 113 n. 66. But section 271.153(a) places “LIMITATIONS ON ADJUDICATION AWARDS” by authorizing courts to award only amounts that fall within the expressly enumerated categories, which under the current version of the statute include:

• certain types of damages: “the balance due and owed ... under the contract” under section 271.153(a)(1) and “the amount owed for change orders or additional work” under (a)(2); • certain types of attorney’s fees: “reasonable and necessary attorney’s fees that are equitable and just” under (a)(3); and • all interest allowed by law under (a)(4).

See TEX. LOCAL GOV’T CODE § 271.153. The Court’s reading of section (a)(1) does not alter the scope of recoverable attorney’s fees or interest, it simply expands the scope of authorized damages to include all recoverable damages. Therefore, it does not limit recoverable damages at all.

Third, the Court’s construction of subsection (a)(1) renders subsection (a)(2) superfluous. Subsection (a)(2) expressly authorizes the recovery of “the amount owed *126 for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract.” TEX. LOCAL GOV’T CODE § 271.153(a)(2). If, as the Court holds, subsection (a)(1) authorizes the recovery of all common law damages recoverable for breach of the contract, then subsection (a)(1) already authorizes recovery of amounts owed for change orders and additional work, and subsection (a)(2) adds nothing to the mix.8 But if, as I contend, subsection (a)(1) only authorizes recovery of the amounts actually provided for or contemplated within the contract (that is, “the balance due and owed ... under the contract”), then subsection (a)(2) adds to that any amounts owed for change orders and additional work that were not originally provided for or contemplated in the parties’ contract.

8 The Court responds that its construction does not render subsection (a)(2) superfluous because subsection (a)(2) “clarifies that change orders can be the basis for recovery, even if it were argued that they were not ‘under the contract.’ ” Ante at 113 n. 66. But this is exactly the point: under the Court’s construction, there is no need for such clarification because everything that the law permits to be a basis for recovery in a breach of contract action (the only claim that can be brought under the statute) can be the basis for recovery under the 271.153(a), regardless of whether it is “under the contract.”

Finally, under the Court’s construction of subsection (a)(1), the exception to the exclusion of consequential damages in subsection (b)(1) would completely swallow the rule. Subsection (b)(1) provides that recoverable damages may not include “consequential damages, except as expressly allowed under Subsection (a)(1).” Id. § 271.153(b)(1). As the Court notes, “[d]elay damages are consequential damages.” Ante at 114 n. 71. If subsection (a)(1) authorizes the recovery of all common law damages for breach of contract, then consequential damages, which are recoverable for a breach of contract, are “expressly allowed under Subsection (a)(1).” And in that case, subsection (b)(1) would not exclude any consequential damages. See TEX. LOCAL GOV’T CODE § 271.153(a)(1), (b). In short, under the Court’s construction, subsection (a), which says recoverable amounts are “limited” to those specified in subsections (a)(1) through (a)(4), does not in fact “limit”

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anything; and subsection (b), which says recoverable amounts “may not include” those listed in subsection (b)(1), does not in fact exclude anything.

In addition to the language of the statute, the Court’s holding contradicts our precedent on this very point. We have addressed section 271.1 53(a)(1) in three prior decisions, and in each of them we have held, or at least indicated, that a “balance” is “due and owed ... under the contract” only if it is “stipulated,” “provided for,” or at least “contemplated” within the parties’ written agreement. See Sharyland Water Supply Corp. v. City of Alton, 354 S.W.3d 407, 413 (Tex.2011) (“The kind of damages sought by Sharyland were not those provided for or contemplated in the Water Supply Agreement and are not a ‘balance due and owed’ under that contract.”); Kirby Lake, 320 S.W.3d at 840 (holding that the damages sought were part of the balance due and owed under the contract because “the Agreements do stipulate the amount of reimbursement owed upon approval of bond funds”); Tooke, 197 S.W.3d at 346 (holding that lost profits from additional work “are consequential damages excluded from recovery under the statute”).

In Tooke, the Court held that the claimants could not recover after the City of Mexia prematurely terminated their service contract because they “claim [ed] only lost profits on additional work they should have been given,” which “are consequential *127 damages excluded from recovery under the statute.” 197 S.W.3d at 346; see TEX. LOCAL GOV’T CODE § 271.153(b)(1). If, as the Court holds today, “a ‘balance due and owed ... under the contract’ is simply the amount of damages for breach of contract payable and unpaid,” ante at 125, the Tookes should have been able to recover lost profits under section 271.153(a)(1), and they should not have been excluded as consequential damages under subsection (b)(1) because they fall within the exception for consequential damages expressly authorized under subsection (a)(1). In short, the lost profits in Tooke were consequential damages not authorized under the parties contract, just as the Court recognizes Zachry’s delay damages to be. Yet we held that the Tookes’ lost profits were not recoverable even though they, like Zachry’s delay damages, were “damages ... payable and unpaid” and recoverable under the common law for breach of contract.

Similarly, in Sharyland, the contractor, the Sharyland Water Supply Corporation, sought to recover its “increased cost to perform” its contractual duty to repair and maintain a water system, which allegedly resulted from the City of Alton’s breach of its own contractual duties. 354 S.W.3d at 413. We held that section 271.153(a)(1) did not authorize Sharyland to recover its increased repair and maintenance costs because “[t]he kind of damages sought by Sharyland were not those provided for or contemplated in the Water Supply Agreement and are not a ‘balance due and owed’ under that contract.” Id.9

9 The Court notes that, in the next sentence in Sharyland, the Court stated: “Nor were these costs the ‘direct result of owner-caused delays or acceleration....’ ” Ante at 113 n. 69 (quoting Sharyland, 354 S.W.3d at 413). The Court asserts that, by this sentence, we treated the “including” clause at the end of subsection 271.153(a)(1) “as stating independently that delay damages are recoverable,” and “we suggested that if [the damages sought had been for owner-caused delays], they would have been recoverable even if neither ‘due and owed under’ nor ‘provided for or contemplated in’ the contract.” Id. The Court reads far too much into this language. What we actually said in Sharyland was:

The kind of damages sought by Sharyland were not those provided for or contemplated in the Water Supply Agreement and are not a “balance due and owed” under that contract. Nor are these costs the “direct result of owner-caused delays or acceleration,” or the “amount owed for change orders or additional work the contractor [was] directed to perform by [the] local governmental entity in connection with the contract.” Sharyland, 354 S.W.3d at 413. We thus addressed all provisions of subsections (a)(1) and (a)(2), demonstrating that there was no possible basis on which any of them could have authorized the recovery of the repair and maintenance costs that Sharyland sought. See id. Sharyland did not argue that its damages were independently recoverable as “owner-caused delay damages,” and we did not address the issue for which the Court now cites this language. See id. Instead, we simply explained that the damages Sharyland sought did not fit within any of the descriptions in subsection (a)(1) or (a)(2). See id. And, consistent with Tooke and Kirby Lake, we equated “the balance due and owed ... under the contract” with the amounts “provided for or contemplated” in the parties’ agreement. See id. I address the issue of whether the “including” clause at the end of subsection (a)(1) authorizes delay damages that are not “due and owed ... under the contract” in the next section.

In Kirby Lake, by contrast, we held that the damages the claimant sought were recoverable as “the balance due and owed ... under the contract” because “the Agreements do stipulate the amount of reimbursement owed upon approval of bond funds.” 320 S.W.3d at 840 (emphasis added). Consistent with the language of the statute and our precedent, I would hold that section 271.153 does not authorize Zachry to recover its delay damages because those damages are not provided for or contemplated in the parties’ agreement, *128 which instead expressly bars recovery of delay costs, and thus are not part of “the balance due and owed by the [Port Authority] under the contract.” See TEX. LOCAL GOV’T CODE § 271.153(a)(1).

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B. “Including Any Amount Owed as Compensation for the Increased Cost to Perform....”

Relying on the language at the end of section 271.153(a)(1), the Court asserts that “Section 272.153(a)(1) does not require the ‘balance due and owed ... under the contract’ to be ascertainable from the contract because, for one thing, this Section expressly includes ‘any amount owed as compensation ... for owner-caused delays,’ an amount which cannot be determined in advance, when the contract is executed.” Ante at 111. To the extent the Court is arguing that the statute authorizes recovery of amounts that are not quantified in the contract or ascertainable at the time of contracting, I agree. Amounts need not be quantified in the contract or ascertainable at the time of contracting to be “due and owed ... under the contract.” Delay costs, in particular, cannot be quantified at the time of contracting because the parties cannot predict the length of the delay or how the delay will impact the contractor’s work. But parties can, and sometimes do, agree that the owner will compensate the contractor for owner-caused delays, and when they do, the delay costs are recoverable under the statute. Here, however, the parties did not agree that the Port Authority would compensate Zachry for owner-caused delays; instead, they expressly agreed that Zachry would receive “no financial compensation for delay or hindrance to the Work ... EVEN IF SUCH DELAY OR HINDRANCE” was owner-caused.

The Court misconstrues the language at the end subsection (a)(1) to independently authorize recovery of “any amount owed as compensation ... for owner-caused delays,” even if that amount is not part of “the balance due and owed ... under the contract.” Ante at 111. In doing so, the Court overlooks the key word that connects these two phrases: “including.” The word “including” in this subsection does not expand the meaning of the words that come before it (“the balance due and owed”); rather, it limits the meaning of the words that come after it (“any [owner-caused delay damages]”) to “include” only those owner-caused delay damages that are in fact “due and owed.” See BLACK’S LAW DICTIONARY at 766 (defining “include” to mean “contain as part of something”). The Court thus reads subsection (a)(1) as authorizing recovery of the balance due and owed ... under the contract and (or plus) any delay damages, when in fact the statute authorizes recovery of “the balance due and owed ... under the contract ..., including any amount owed ” as damages for owner-caused delays. TEX. LOCAL GOV’T CODE § 271.153(a)(1) (emphasis added).

For example, if a franchise agreement authorized a franchisee to operate “in any Texas city, including Athens,” the agreement would permit operations in Athens, Texas, but not in Athens, Greece, or Athens, Georgia. The word “including” is not a synonym for the word “and.” It does not expand the meaning of “any Texas city” to include Athens, Greece, or Athens, Georgia, merely because those cities are also named “Athens.” Instead, it limits the scope of the reference to “Athens” to the “Texas city” by that name.10 In the *129 same way, the word “including” in subsection 271.153(a)(1) does not mean “and.” It does not expand the meaning of “the balance due and owed ... under the contract” to include “owner-caused delay damages” that are not due and owed under the contract. Instead, it limits the scope of the reference to “owner-caused delay damages” to those “owner-caused delay damages” that are part of “the balance due and owed ... under the contract.”

10 Or, to use the Court’s “more apt example,” see ante at 112 n. 65, the phrase “a city, including any named Athens,” includes any city named Athens, which (as the Court notes) is “a longer list,” but it still only “includes” cities named Athens. It would not include a corporation, or person, or pet named “Athens,” because the word “including” limits the second word “Athens” to those that fit within the first word “city.” In the same way, the word “including” in section 271.153(a)(1) limits the second phrase “delay damages” to those that fit within the first phrase “balance due and owed ... under the contract.” Any delay damages that are not part of the balance due and owed under the contract are not “included” in the statute’s waiver.

The language the Legislature used in its most recent statutory waiver of immunity for breach of contract suits further confirms this point. See TEX. CIV. PRAC. & REM.CODE § 114.004. In this statute, through which the Legislature waived immunity for certain contract claims against state agencies just last year, the Legislature used the same language it used in section 271.153, but added a final clause to further clarify that the amount recoverable “is limited to”:

the balance due and owed by the state agency under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration if the contract expressly provides for that compensation....

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Zachry Const. Corp. v. Port of Houston Authority of Harris County, 449 S.W.3d 98 (2014) 57 Tex. Sup. Ct. J. 1378

Id. § 114.004(a)(1) (emphasis added). While the Court contends that the inclusion of the emphasized language gives this statute a meaning that is different than the meaning of section 271.153(a)(1), which does not include the emphasized language, that contention is unsupportable within this context. The language of sections 114.004 and 271.153 (and, for that matter, 262.007) are in all material respects the same, demonstrating that the Legislature intended to follow a uniform approach in strictly limiting the scope of these statutory waivers of immunity. More importantly, by using the same “including” language that appears in section 271.153, section 114.004 confirms that both statutes only permit recovery of owner-caused delay damages that are “included” within “the balance due and owed ... under the contract.” If anything, section 114.004(a)(1) narrows the scope of recoverable damages by requiring that the contract “expressly provide[ ] for” the payment of such compensation.

Parties to construction contracts often allocate unquantified costs between themselves, just as Zachry and the Port Authority did with delay costs. Zachry and the Port Authority allocated all of Zachry’s delay-related expenses and losses to Zachry, even if the Port Authority was at fault for the delay. But parties to construction contracts sometimes choose a different allocation, obligating an owner to reimburse the contractor for some or all owner-caused delay costs. See, e.g., MasTec N. Am., Inc. v. El Paso Field Servs., L.P., 317 S.W.3d 431, 452 (Tex.App.-Houston [1st Dist.] 2010) (involving construction contract in which owner agreed to compensate contractor for certain owner-caused delays) rev’d, 389 S.W.3d 802 (Tex.2012) (holding that contract allocated all risk of unknown obstructions in construction path to contractor); Shintech Inc. v. Group Constructors, Inc., 688 S.W.2d 144, 148 (Tex.App.-Houston [14th Dist.] 1985, no writ) (involving contract that allocated to the owner’s account undue expenses incurred by the contractor as a result of owner-caused delays). If this contract had *130 included such a clause, I would agree that whatever portion of the delay costs the Port Authority had agreed to pay would constitute a balance due and owed by the Port Authority under the contract, and would thus be recoverable under section 271.153(a)(1). But since the Port Authority did not agree to pay any of Zachry’s delay damages, and the contract does not provide for or contemplate the Port Authority’s payment of such damages, those damages are not part of “the balance due and owed ... under the contract” and thus are not recoverable under section 271.153.

III.

Conclusion

I agree with the Court that Zachry’s claim to recover installment payments that the Port Authority withheld as liquidated damages are recoverable under section 271.153 and that Zachry did not unambiguously release that claim, but I would hold that section 271.153 does not waive the Port Authority’s immunity against Zachry’s claim for delay damages. Based on the language and our prior constructions of the statute, I would hold that section 271.153 permits an award of delay damages only if those damages are provided for or contemplated in the agreement and are thus part of “the balance due and owed ... under the contract.” Because this contract did not provide for or contemplate the Port Authority’s payment of Zachry’s delay damages, I would hold that Zachry’s delay damages are not part of “the balance due and owed ... under the contract”; section 271.153 therefore does not authorize an award of those damages in this case; and thus section 271.152 does not waive the Port Authority’s immunity against Zachry’s suit for such damages.

Parallel Citations

57 Tex. Sup. Ct. J. 1378 End of Document © 2015 Thomson Reuters. No claim to original U.S. Government Works.

© 2015 Thomson Reuters. No claim to original U.S. Government Works. 32

TAB 4

Charge of the Court and Verdict dated January 14, 2010 (CR59:17386-409)

• CAUSE NO. 2006-72970 • P-24

ZACHRY CONSTRUCTION § · fN THE· DISTRICT COURT OF 0 ri CORPORATION n/k/a Zachry Industrial, § 0 N ...... , Inc. § ... ri § ...... ri V. § HARRIS COUNTY, TEXAS § PORT OF HOUSTON § AUTHORITY OF HARRIS § p COUNTY, TEXAS s I 51ST JUDICIAL DISTRICT ./ i

J4,y W:~!tlJ ~11 LADIES AND GENTLEMEN OF TilE JURY:

CHARGE OF THE COURT '""

. '.2Y; cOlo (h:. ·~ This case is submitted to you by asking questions about the facts, which you m dec1 · from the evidence you have heard in this trial. You arc the sole judges of the credibility o c witnesses and the weight to be given their testimony, but in matters of law, you must be governed by the instructions in this charge. In discharging your responsibility on this jury, you will observe all the instructions which have previously been given you. I shall now give you additional instructions which you should ~.:arefully and strictly follow during your deliberations.

I. Do not let bias, prejudice or sympathy play any part in your deliberations.

2. In arriving at your answers, consider only the evidence introduced here under oath and such exhibits, if any, as have been introduced for your consider:.~tion under the rulings of the court, that is, what you have seen and heard in this courtroom, together with the law as given you by the court. In your deliberations, you will not consider or discuss anything that is not represented by the evidence in this case.

3. Since every answer that is required by the charge is important, no juror should state or consider that any required answer is not important.

4. You must not decide who you think should win, and then try to answer the questions accordingly. Simply answer the questions, und do not discuss nor concem yourselves with the effect of your answers.

5. You will not decide the answer to a question by lot or by drawing straws, or by any other method of chance. Do not return a quotient verdict. A quotient verdict means that the jurors agree to abide by the result to be reached by adding together each juror's figures and dividing by the number of jurors to get an average. Do not do any trading on your answers; that is, one juror should not agree to answer a certain question one way if others will agree to answer another question another way.

1738€

6.

• • Unless otherwise instructed, you may answer a question upon the vote of ten or more jurors. If you answer more than one question upon the vote of ten or more jw-ors, the same group of at least ten of you must agree upon tho answers to each of thosequestions .

These instructions are given you becauseyour conduct is subject to review the same us that of the witnesses, parties, attorneys and the judge. If it should be found that you have disregarded any of these instructions, it will be jury misconduct and it may require another trial by another jury; then all of our time will have been wasted.

The presiding juror or any other who observes a violation of the court's instructions shall immediately warn the one who is violating the same and caution the juror not to do so again.

When words are used in this charge in a sense that varies from the meaning commonly understood, you arc given a proper legal definition, which you are bound to accept in place of any other meaning.

1\nsw<..-r "Y cs" or "No" to all questions unless otherwise instructed. A "Y cs" answer must be based on a preponderance of the evidence unless you are othenvise instructed. If you do not find that a preponderance of the evidence supports a "Yes" answer, then answer "No." The tem1 ·'preponderance of the evidence" means the greater weight of credible evidence admitted in this case. A preponderance of the evidence is not measured by the number of witnesses or by the number of documents admitted in evidence. For a fact to be proved by a preponderance of the evidence, you must find that the fact is more likely true than not true. Whenever u question requires an answer other than "Y cs" or "No," your answer must be based on a preponderance of the evidence unless you arc otherwise instructed.

A fact may be established by direct evidence or by circumstantial evidence or both. A fact is established by direct evidence when proved by documentary evidence or by witnesses who saw the act done or heard the words spoken. A fact is established by circumstantial evidence when it may be fairly and reasonably inferred from other facts prOV(.:d.

A party's conduct includes the conduct of another who acts with the party's authority or apparent authority. A party's knowledge includes facts known to the party acting with the other party's authority, and which arc material lo the duties of the party acting with the other party's authority.

Authority for another to act for a party must arise from the party's agreement that the other act on behalf and for the benefit of the party. If a party so authorizes another to perform an act, that other party is also authorized to do whutevcr else is proper, usual, and necessary to perform the act expressly authorized.

Apparent authority exists if u party ( 1) knowingly permits another to hold himself out ns having authority or, (2) through lack of ordinary care, bestows on another such indication~ of authority that lead a reasonably prudent person to rely on the apparent existence of authority to

3

• • his detriment. Only the acts of the party sought to be charged with responsibility for the conduct of another may be considered in determining whether apparent authority exists.

The following definitions apply in this charge.

"The Contract" means the Bayport Terminal Complex Phase lA Wharf and Dredging Contract. Unless otherwise specified, sections of the Contract that are used in this Charge are from the General Conditions of the Contract. The Contract consists of the Contract Documents as defined in §1.10 ofthe Contract.

"Port" means the Port of 1Iouston Authority of Harris County, Texas.

"Zachry'' is the Contractor under the Contract with the Port. Before January 1, 2008, it was called Zachry Construction Corporation. From and after January I, 2008, it is called Zachry Industrial, Inc.

"New Zachry" is Zachry's subcontractor under the Management Services Agreement, PX 643, from and after January I, 2008. From and after January 1, 2008, New Zachry is called Zachry Construc-tion Corporation.

After you retire to the jury room, you will select your own presiding juror. The first thing the presiding juror will do is to have this complete charge read aloud and then you will deliberate upon your answers to the questions asked.

It is the duty of the presiding juror-

1. to preside during your deliberations,

2. to sec that your deliberations arc conducted in an orderly manner and in accordance with the instructions in this charge,

3. to write out and hand to the bailiff any communications concerning the case that you desire to have delivered to the judge,

4. to vote on the questions.

5. to write your answers to lhe questions in the spaces provided, and

6. to certify to your verdict in the space provided tbr the presiding juror's signature or to obtain the signatures of all the jurors. who agree with the verdict if your verdict is less than unanimous.

You should not discuss the case with anyone, not even with other members of the jury, unless all of you are present and assembled in the jury room. Should anyone attempt to talk to you about the case before the verdict is returned, whether at the courthouse, at your home, or elsewhere, please inform the judge of this fact.

• • When you have answered all the questions .you arc required to answer under the instructions of the judge and your presiding juror has placed your answers in. the spaces providedand signed the verdict as presiding juror or obtained the signatures, you will inform the bailiff at the door of the jury room that you have reached a verdict, and then you will return into court with your verdict.

JUDGE PRESrDING JAN 2 1 ?010 • Question No. I • Did the Port fail to comply with Change Order 4?

It is your duty to interpret the language of Change Order 4 and the Scope, Time, and Price Modifications to Specifications and Proposal attached to Change Order 4.

You must decide its meaning by detcnnining the intent of the parties at the time of the agreement. Consider all the facts and circumstances surrounding the making of the agreement, the interpretation placed on the agreement by the parties, and the conduct of the parties.

In answering this question only, you are not being asked to decide whether the Port failed to comply with § 5.10 of the Contract.

Furthermore, in answering this question, you are instructed that nothing in § 5.41 gave the Port the right to issue its October 11, 2005 response to the September 9, 2005 frozen cutoff wall design.

Answer ''yes" or ''no."

Answer: _'[1_.___£;..::...(7 _ __

5

17390

• • Question No.2

Did the Port fail to comply with§ 5.10 ofthe General Conditions?

In answering this question, it is your duty to interpret §§ 5.10 and 5.22 and the terms contained therein.

You must decide the meaning of these provisions of the Contract by determining the intent of the parties at the time of the agreement. Consider all the facts and circumstances surrounding the making of the agreement, the interpretation placed on the agreement by the parties, and the conduct of the parties.

In determining the meaning of these provisions, you may also consider a trade custom or usage, if any, if you find that such trade custom or usage existed. However, a trade custom or usage, if any, cannot vary, control, impair, restrict or enlarge the express language of the Contract. A trade custom or usage exists if it is a practice so generally or universally well known and used in the industry that the parties to a contract are charged with knowledge of its existence to such an extent as to raise the presumption that the parties contracted with reference to it.

Furthermore, in answering this question, you arc instructed that nothing in § 5.41 gave the Port the right to issue its October 11, 2005 response to the September 9, 2005 frozen cutoff wall design.

Answer "yes" or "no."

Answer: ~£';

• • If you answered "yes'' to Question No. I and/or 2, then answer the following question.

Otherwise, do not answer the following question.

Question No. 3

What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Zachry for its damages, if any, that resulted from the Port's failure to comply?

Consider the following elements of damages, if any, and none other.

A. The balance due and owed by the Port, if any, under the Contract, including any amount owed as compensation for any increased cost to perform the work as a direct result of Port-caused delays, and

B. The amount owed, if any, for additional work that Zachry was directed to perform by the Port in connection with the Contract.

You may consider amounts, if any, owed as compensation for increased cost to pertonn the work as a direct result of Port-caused delays, if any, only if you find that such increased costs were a natural, probable, and foreseeable consequence of the Port's failure to comply.

In determining the balance due and owed for the increased cost to perform the work under A (above), if any, and the amount owed for additional work under B (above), if any, you should include Reimbursable Costs as defined in Section 1.1 of the Management Services Agreement (PX 643), incurred by New Zachry to perform Zachry's obligations under the Contract.

You are instructed that Zachry was not required to take any of the following actions to be able to recover damages for the Port's failure to comply: (I) obtain a written Construction Change Directive or a fully executed Change Order from the Chief Engineer under § 5.41 or under § 5.52 to the extent it imposes requirements consistent with §5.41; or (2) provide notice that a Contract interpretation by the Port constituted a change to the Contract under § 5.42 and that Zachry was entitled to an adjustment in the Contract Time and Price. You arc instructed that you may consider §§ 5.41, 5.42, and 5.52 to the extent it imposes requirements consistent with §5.41, only in assessing a party's state ofmind.

You are instructed that § 5.07 of the Contract precludes Zachry from recovering dt!lay or hindrance damages, if any, unless you find that the delay or hindrance damagt!s, if any, resulted from a delay or hindrance that was the result of the Port's actions, if any, that constituted arbitrary and capricious conduct, active interference, bad faith and/or fraud.

"Arbitrary and capricious" means willful and unreasoning action without due consideration and in disregard of the facts, circumstances, and rights of other parties involved.

• • "Active interference" means affirmative, willful action that unreasonably interferes with the other party's compliance with the contract. "Active interference" requires more than a simple mistake, error in judgment, lack of total effort, or lack. of complete diligenoo.

''Bad faith" is conscious doing of a wrong tor a dishonest purpose.

"Fraud" occurs when

1. a party makes a material misrepresentation,

2. the misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge ofthe truth and as a positive assertion,

3. the misrepresentation is made with the intention that it should be act{,"'Cl on by the other party, and

4. the other party suffers injury as a result of its reliance on the misrepresentation.

"Misrepresentation" means a promise of future performance made with an intent, at the time the promise was made, not to perform as promised, and the promise of future performance is that the Port would comply with the terms of Change Order 4.

Do not add any amount for interest on damages, if any.

Do not include in your answer any amount that you find that the Port proved, by a preponderance ofthe evidence, that Zachry could have avoided by the exercise of reasonable care.

• • If you answered Question No. 3 with any amount greater than zero, then answer the following question. Otherwise do not answer the following Question.

Question No. 4

What percentage of the damages that you found in your answer to Question No. 3 was for delay or hindrance damages?

Answer with a percentage from 0% to I 00%

Answer: :)g, f 3 --""----------

%

9

1739"4

• • If you answered Question No. 3 with a number greater than zero, then answer the following Question. Otherwise do not answer the following Question.

Question 5

What amount of damages that you found in Question No. 3, if any, was for Reimbursable Costs as defined in Section l.1 of the Management Services Agreement (PX 643), incurred by New Zachry to perform Zachry's obligations under the Contract?

Answer in dollars and cents, if any.

10

17395

• • If you answered "yes" to Question Nos. I and/or 2, then answer the following question.

Otherwise, do not answer the following question. ·

Question No.6

Was the Port's failure to comply excused?

Answer "yes" or ''no" for each of the fo1lowing:

A. Waiver

Failure to comply by the Port is excused if compliance was waived by Zachry. Waiver is an intentional surrender of a known right or intentional conduct inconsistent with claiming the right.

Answer ''yes" or "no."

Answer: oo B. Equitable estoppel

Failure to comply by the Port is excused if Zachry is equitably estopped from asserting that f<1ilure to comply. Equitable estoppel is established if all of the following circumstances occurred:

I. Zachry a. by words or conduct made a false representation or ~.:oncealed material facts when there was a duty to disclose, b. with knowledge of the facts or with knowledge or information that would lead a reasonable person to discover the facts, and c. with the intention that the Port would rely on the false representation or concealment in acting or deciding not to act; and

2. The Port a. did not know and had no means of knowing the real !acts and b. relied to its detriment on the false representation or concealment of material facts.

A duty to disclose may arise when (I) a person voluntarily discloses partial information but fails to disclose the whole truth; (2) a person makes a representation but fails to disclose new information that .makes the earlier representation misleading or untrue; or (3) a person makes a partial disclosure and conveys a false impression.

• Answer ''yes" or "no."

• Answer: NQ..

C. Quasi-estoppel

Failure to comply by the Port is excused if the doctrine of quasi-estoppel applies. Quasi- estoppel bars a party from asserting, to another's disadvantage, a right inconsistent with a position previously taken by that party. This doctrine applies when it would be unconscionable to allow a party to maintain a position inconsistent with one in which it had acquiesced, or from which it had accepted a benefit.

Answer "yes" or "no.''

Answer: No D. Release

Failure to comply by the Port is excused if you find Zachry released its claims that the Port failed to comply.

In answering this Subsection D of this Question, you must decide the meaning of Exhibits DX1112.013 and PX884.014l (re Payment Estimate 21 ); DXlll3.013 and PX884.0150 (re Payment Estimate 22); DXIl 14.012 and PX884.0159 (re Payment Estimate 23); DXll 15.017 and PX884.0168 (rePayment Estimate 24); DXIII6.012 and PX884.0177 (re Payment Estimate 25); DX1117.013 and PX884.0185 (re Payment Estimate 26); DXI117.011 and PX884.0193 (rePayment Estimate 27); DXlll8.013 and PX884.0203 (rc Payment Estimate 28); DX1120.020 and PX884.0213 (re Payment Estimate 29); DXI121.013 and PX884.0223 (rePayment Estimate 30): DX1122.047 and PX884.0233 (rePayment Estimate 31).

You must decide the meaning of the above-listed exhibits by determining the intent of the parties at the time of the agreement. Consider all the facts and circumstances surrounding the making of the agreement, the interpretation placed on the agreement by the parties, and the conduct of the parties.

In determining the meaning of an agreement, you may also consider a trade custom or usage, if any, if you find that such trade custom or usage existed. However, a trade custom or usage, if any, cannot vary, control, impair, restrict or enlarge the express language of the Contract. A trade custom or usage exists if it is a practice so generally or universally well known and used in the industry that the parties to a contract are charged with knowledge of its existence to such an extent as to raise the presumption that the parties contracted with reference to it.

12

17397

• Answer ''yes'' or "no." '

• Answer: Alf)

13

17398

• • If you answered "yes" to Question No. I, then answer the following question. Otherwise, do not answer the following question.

Question No.7.

Was the Port's failure to comply found by you in Question No. 1 excused by Zachry's fraudulent inducement, if any, of Change Order 4?

For purposes of this question, fraudulent inducement occurs when-

l. a party makes a material misrepresentation, or a party who has a duty to disclose fails to disclose a material fact within the knowledge of that party,

2. the misrepresentation is made with knowledge of its falsity or made recklessly without any knowledge of the truth and as a positive assertion, or the party knows that the other party is ignorant of the undisclosed fact and does not have an equal opportunity to discover the truth,

· 3. the misrepresentation is made with the intention that it should be acted on by the other party, or the party intends to induce the other party to take some action by failing to disclose the fact, and

4. the other party suffers injury as a result of its reliance on the misrepresentation or as a result of acting without knowledge of the undisclosed fact.

For purposes of this question, "misrepresentation" means a false statement of fact or a promise of future performance made with an intent, at the time the promise was made, not to perform as promised.

A duty to disclose may arise when (1) a person voluntarily discloses partial information but fails to disclose the whole truth; (2) a person makes a representation but fails to disclose new information that makes the earlier representation misleading or untrue; or (3) a person makes a partial disclosure and conveys a false impression.

Answer "yes" or ·r·" Answer: A. Q

• • If you answered "yes" to Question No. 7, then answer the following question. Otherwise, do not answer the following question.

Question No. g

Is the Port barred from asserting its defense of fraudulent inducement?

The Port is barred from asserting its defense of fraudulent inducement if the doctrines of waiver, quasi-estoppel, and/or ratification apply.

Answer "yes" or "no" for each of the following:

A. Waiver

Waiver is an intentional surrender of a known right or intentional conduct inconsistent with claiming the right.

Answer "yes'' or "no."

Answer:

B. Quasi-Estoppel

Under the doctrine of quasi-estoppel, a party may not assert, to another's disadvantage, a right inconsistent with a position previously taken by that party. This doctrine applies when it would be unconscionable to allow a party to maintain a position inconsistent with one in which it had acquiesced, or from which it had accepted a benefit.

Answer "yes" or "no."

Answer:

C. Ratification

Ratification is the adoption or confirmation by a person, with full knowledge of the fraud, and of all material facts, and with the intention, clearly manifested, of abiding by the contract and waiving all right to assert the deception.

• Answer "yes" or "no."

• Answer:

• • Question No. 9

Did the Port fail to comply with the Contract by withholding, from the Port's payment on amounts invoiced by Zachry, the S600,000 for dredging?

Answer ''yes" or "no."

Answer: N12

18

• • If you answered "yes" to Question No. 9, answer the following question. Otherwise, do not answer the following question.

Question No. 10

What sum of money, if any, if paid now in cash, would fairly and reasonably compensate Zachry for its damages, if any, that resulted from such failure to comply?

Consider the following element of damage, if any, and none other:

The balance due and owing by the Port, if any, under the Contract, resulting from the failure to comply that you found in Question 9.

Do not add any amount for interest on damages.

Answer in dollars and cents.

Answer:

• • If you answered Question No. 9 "yes," then answer the following Question. Otherwise, do not answer the following Question.

Question No. 11

Was the Port's failure to comply excused?

The Port's failure to comply is excused if you find, by a preponderance of the evidence, that Zachry released its claim with respect to that failure to comply.

In answering this question, you must decide the meaning of DX 1114.012 and PX884.0159 (rePayment Estimate 23); DX1115.017 and PX884.0168 (rePayment Estimate 24); DX1116.012 and PX884.0177 (rePayment Estimate 25); DX1117.013 and PX884.0185 (rc Payment Estimate 26); DX1117.011 and PX884.0193 (re Payment Estimate 27); DX1118.013 and PX884.0203 (rePayment Estimate 28); DX1120.020 and PX884.0213 (re Payment Estimate 29); DX1121.013 and PX884.0223 (re Payment Estimate 30); DX1122.047 and PX884.0233 (rc Payment Estimate 31 ).

You must decide the meaning ofthe above-listed exhibits by dt:termining the intent of the parties at the time of the agreement. Consider all the facts and circumstances surrounding the making of the agreement, the interpretation placed on the agreement by the parties, and the conduct of the parties.

In determining the meaning of an agreement, you may also consider a trade custom or usage, if any, if you find that such trade custom or usage existed. However, a trade custom or usage, if any, cannot vary, control, impair, restrict or enlarge the express language of the Contract. A trade custom or usage exists if it is a practice so generally or universally well known and used in the industry that the parties to a contract are charged with knowledge of its existence to such an extent as to raise the presumption that the parties contracted with reference to it.

Answer "yes'' or "no."

Answer:

• Question No. 12 • . The_Cow1 has.. determined. that. the..Eort failed. to comply.. with the Contract by-failing. topay Zachry $2.36 million that the Port withheld as liquidated damages.

Was the Port's failure to comply excused, in whole or in part for any of the following reasons?

A. Offset and/or Withholding

(i) You may find excuse if you find, by a preponderance of the evidence, that the Port is entitled to withhold for fenders under § 6.05 of the General Conditions of the Contract and/or that the Port is entitled to offset for fenders under § 6.17 of the General Conditions of the Contract.

The Port is entitled to withhold and/or offset for fenders under these provisions if you find, by a preponderance of the evidence, that, with respect to the fenders, Zachry failed to comply with the Contract resulting in a loss to the Port.

Answer "ye~ ; · " Answer: £;

(ii) If you answered ''yes" to the prior question A(i), then answer the following question. Otherwise, do not answer the following question.

To what extent, in dollars and cents, is the Port's failure to comply excused by offset and/or withholding?

Answer in dollars and cents, if any.

Answer: Cf AJ7 c:DO. {)O

1

B. Release

1. You may also find excuse if you find, by a preponderance of the evidence that Zachry released its claim for the failure to comply.

In answering this question, you must decide the meaning of DX 1114.012 and PX884.0l59 (re Payment Estimate 23); DXI 115.017 and PX884.0168 (re Payment Estimate 24); DXlll6.012 and PX884.0177 (rePayment Estimate 25); DX1117.013 and PX884.0185 (re Payment Estimate 26); DX1117.011 and PX884.0193 (re Payment Estimate 27); DX1118.013 and PX884.0203 (re Payment Estimate 28); DX1120.020 and PX884.0213 (re Payment Estimate 29); DX1121.013 and PX884.0223 (rePayment Estimate 30); DX1122.047 and PX884.0233 (rc Payment Estimate 31).

• • You must decide the meaning of the above-listed exhibits by determining the intent of the parties at the time. of. the agreement.- Consider all. the· facts andcircumstances surrounding the making of the agreement, the interpretation placed on the agreement by the parties, and the conduct of the parties.

In determining the meaning of an agre<.-ment, you may also consider a trade custom or usage, if any, if you find that such trade custom or usage existed. However, a trade custom or usage, if any, cannot vary, control, impair, restrict or enlarge the express lan!:,'Uagc of the Contract. A trade custom or usage exists if it is a practice so generally or universally wc11 known and used in the industry that the parties to a contract arc charged with knowledge of its existence to such an extent as to raise the presumption that the parties contracted with reference to it.

Answer "yes" or "no."

Answer: --1-hJ""-'O.;l.----

(ii) If you answered "yes" to the prior question B(i), then answer the following question. Otherwise, do not answer the following question.

To what extent, in dollars and cents, is the Port's failure to comply excused by release?

Answer in dollars and cents, if any.

D

Answer: - - - - - -

• • Question No. 13

What is a reasonable fee for the necessary services of the Port's attorneys, stated in dollars and cents?

Consider the following factors in determining the reasonableness of an attorney's fees award:

a. the time and labor involved, the novelty and difficulty of the questions involved, and the skill required to perform the legal services properly;

b. the likelihood that the acceptance of the particular employment will preclude other employment by the lawyer;

c. the fee customarily charged in the locality for similar legal services;

d. the amount involved and the results obtained;

c. the time limitations imposed by the client or the circumstances;

f. the nature and length of the professional n.:lutionship with the client;

g. the experience, reputation, and ability of the lawyer or luwycrs performing the services;

and

h. whether the fcc is fixed or contingent on results obtained or unccrtuinty of collection before the legal services have been rendered.

Answer with an amount for each of the following:

(A) Attorney's Fees as to Zachry's Claim Relating to Change Order 4 and/or §5.10 of the Contract.

(I) For preparation and trial with respect to Zachry's claim for the Port's failure, if any, to comply with Change Order 4 and/or §5.10 ofthc Contract.

Answer: i (UEJDO

f

1

j

1 (){)() • 01>

(2) For an appeal to the Court of Appeals with respect to Zachry's claim for the Port's failure, if any, to comply with Change Order 4 and/or §5.1 0 of the Contract.

Answer: _!1_ OJ (200 · 00

23

• • (3) For an appeal to the Supreme Court of Texas with respect to Zachry's claim for the Port's failure, if any, to comply with Change Order 4 and/or §5.1 0 of the Contract.

Answer: I J:)., ~Q.(JD

7

(B) Attorney's Fees as to Zachry's Claim for Withholding the $2.36 million as liquidated damages and the $600,000 for dredging.

(1) For preparation and trial with respect to Zachry's claims for the Port's failure, if any, to comply with the Contract by withholding, from the Port's payments on amounts invoiced by Zachry, the $2.36 million withheld as liquidated damages and the $600,000 withheld for dredging.

Answer: ~ fJ01:JSO . 00

(2) For an appeal to the Court of Appeals with respect to Zachry's claims for the Port's failure, if any, to comply with the Contract by withholding, from the Port's payments on amounts invoiced by Zachry, the $2.36 million withheld as liquidated damages and the $600,000 withheld for dredging.

Answer: t 3 7.5D, oO

(3) For an appeal to the Supreme Court of Texas with respect to Zachry's claims for the Port's failure, if any, to comply with the Contract by withholding, from the Port's payments on amounts invoiced by Zachry, the $2.36 million withheld as liquidated damages and the $600,000 withheld for dredging.

Answer: i I, ~ f::D' ()0

24

• Certificate • W Cr. the. jury~ have answered. the abev6 and. foregoing· questions-as- herein- ·indicated, andherewith return same into court as our verdict.

(To be signed by those rendering the verdict if the jury is not unanimous.)

Jurors' Signatures Jurors' Printed Names

~ \:>o~ro'd%., Chad TSeicrttS

trt;s.J?) riA; (!. r;(o,rx:JQ.-/I C4 ris L 'Je5/- U(

TAB 5

Order on Zachry's 11 Part Motion for Pretrial Determination of Issues of Law (Rule 166(g) Motion) dated October 5, 2009 (CR46:13296-309)

P-14 ENTZ CAUSE NO. 2006-72970

ZACHRY CONSTRUCTION § IN THE DISTRICT COURT OF CORPORATION § § HARRIS COt:NTY, TEXAS Y. § § .PORT OF HOVSTON AliTHORJTY § OF HARRIS COUNTY, TEXAS § 151sr .JCDICIAL DISTRICT

ORDER 0~ ZACHRY'S 11 PART MOTION FOR PRETRIAL DETERMINATION OF ISSUES OF LAW

Came on for considl.!ration Zachry Construction Corporation's (Zachry) 11 Part 1\'lo!ion

Cur Prdrii11 Dctcrmimtion of Issues of Lm. The Court. haYing considered the :-.1otion.

Defendant Port or Houston Authority's (Pili\ l Respllnse. Zachry· s Reply. and PH/\ 's Sur-Reply.

as v;cll as various follow-up kttcr briefs. is of the opinion that Zachry's Motion should be

GRANTED IN PART and DEJ'\lJ::D IN PART.

]SSU\.! ] : The C0urt hclieves it has an understanding ofthis issue having heard the

arguments lll' cnunsel at thl:.' Friday. September 11. 2009 hearing. Separate and apart !"rom the

allegation that thl.:' PliA breached the main contract's section 5.10 (means and methods)./.achry

c\lntcnds that Change Order 4 ( hL'rcin:llter ··CO-f') gave it a contractuul right to. in general. usc

the trccze cutoff wall construction method. Zachry then contends that PH/\ breached C04 by

lall'r rejecting /achry' s use of the freeze cuto±hvall construction method. The Court li nds that

within the documents that comprise the C04 contract. there is an ambiguity as to \\hat is meant

by the term "constructi0n methods" in paragraph 1. and .. similar methods'' in puragraph 9 ofthe

··scope. Time and Price Modifieutions tn Specifications und Proposar· inwrporuted into C04.

I herd~lre. the Court DENIES Pl:1intiff Zadu-y"s t'vlotinn as t\l !ssw: 1 without prejuJi~:c. :1nJ as

of this writing. intends to submit the issue to the jury.

FILED Loren Jackson District Clerk

ocr- 5 zoog Time~' tounty J.'~J13hL._, £J; Har e,..a.s

By -'>.o,-4L....::_:: .-c_==:-------

Oepuly

Issue 2: By this issue, Plaintiff asks the Court for a pretrial determination that there

was no fruuduknt inducement. The Court hereby GRANTS rhis n:quest in purl and DENIES in

part. The Courtiinds that is able to dctL·rmine as a matter of lmv that PH A's agent CH2M Ilill

had the September 9. 2009 frozen cutoff wall design in hand for at least two \Vecks before Pl li\

signL·d CO..J.. The Court hereby GRAJ'\TS a pretrial dekrmination ONLY that then: was no

fraudulent inducement as to the September 9. 2009 rrozen cutoff wall design by Plaintiff

Zachry. 1 The Court hereby DENIES the remainder of the request for prdrial determination as to

lraudulcnt inducement by Plaintiff Zachry (including. but not limited to. alleged

misrepresentations about Zachry's ability to certain meet time deadlines).

JSSUL' J: By this issue. Zachry asks lor a pretrial determination as a matter of law

that "'[ nlo pwvision in the contract gives the port a right to reject or to require revision and

resuhmittal or the contractor" s means und methods." This is an exceedingly broad request by

Zachry that could render mcaningless severn! provisions of the contract that may he read to limit

Zachry's ~..:hoices of means and methods. at least in part. PH/\ ·s response on page 40 asks the

Court to find tlwt "'the Port had the express right under the Contract to issue the ·rcYise and

resubmit' response.'" PHA 's point seems to be that it was free to ask Zachry to revise and

rcsLtbmit. but it did not order Zachry to do so nnd had no po\ver to do so. and thcrelorc it could

not han: breached the contract by simply asking. nicely, that Zachry do SLl. The Court stated at

the hearing on friday. September 11. 2009. that it did not find this Iinc tlr argument try PHA

'- 0 pL'rsuasive . .tvloreover. this line or argument seems to bc consistent with. and l\OT contrary to.

1 The Court Jo.:s not b<:lieve its findings in lssut:s I and::: arc inconsistent. Issue 1 asked abLlUl a pretrial determin::nion of whL·thcr. as a matter of law. CO~ gave Plaintirr Zachry the unambiguous right to employ the frozen cuto!T W<JII construction methodology. The Court tinds that it did not unambiguously allow for a speci!ic design. The Court believes. at this moment. thut a jury cou!J lind rcasnnahly lind either wa) on this issue. Issue::: asko.:J fi.1r a pr..:triul d.:tnmination as a mattt:r of law <.1s to. among otller tllings. \Yhcthcr Plaintiff Zachry rraudulently inJuct:d PI II\ by misrepresenting the design or the frozen cutoff wall. The Court finds as a maHer of l::m that then; was no reliance on any alleged misrepresentation ablllll th.: design because 3 specitic design \\a~ in Cll21\·1 Hill's hands for :z two m:d;.s bl'fi.1re PHA signed CO-+.

Zachry's position that the contract prohibited PIIA from ··rejecting·· the use or the frozen cutoff

wall design (a particular means and method) under section 5.1 0. 2 That is. Zachry claims that

Pill\ was not allowed to do so. and PIIA says it ncwr tried to. To that extent. at kast. those two

positions seem to line up in logical agreement to the Court.

The Court is unwilling to ruk. at this time. that no other pro\·ision of the contract gave

PHA the right to prevent Zachry from conducting itsclrin a particular way. and some of the

provisions that PHA cites on pages 38 and 39 or its Response may in fact han:: allowed

something akin to at least partial rejection. The Court will have to hear more evidence ab~)ut

those proposed bases for rejection (though this is not intended to undo any prior ruling by this

Court regarding any particular clause ol'the contract). The Court h~.:rchy DENIES 7achr;'s

request for a determination as a matter of b\v at this time that NO provision or the Contract gave

PI lAthe right to reject or otherwise command Zachry to conduct itself in a particular way. Even

ifno provision allowed Pll/\ to complL.·tcly reject the frozen cutoiT\\:alL there may be other

pro\·isions cited hy Pl-IA that gave PHA th~ right to oth<.:rwisc limit/achry's conduct at the

project in whole or in part. At this point. the Court is not willing to say. as :.1 matkr of law. that.

one or more of the provisions liskd in the boltom paragraph of page 39 of PHA ·s Response

could not bL· read tu limit Zachry's operations under the contract to some extent. The Court does

not anlrmativcly find that they do. but will not. hy a Rule 166(g) :Vlotion tind that they do not as

a matter of law prior to trial.

This is a different finding than whether or not PHA had the right under the contract to

issue a revise and resubmit (as opposed to reject) response under sections 5.22 and 5.25. The

Court dues not make such a determination as a matter of law under thi::; OrJL-r.

' !his discussion lt:uvt.:s aside !he separate breach of CO-l alleged by Zachry. and focuses only on the alleged breach z by Pili\ umkr Sl.!<.'tion 5.10 (means and methods) und 5.22 {submiti<Jis) of the main contract.

Issue 4: By this issue. Zachry asks for a pretrial determination as a matter of la\\

that the frozen cutoff wall dL'sign was not a submittal undcr scction 5.22 ofthl' contract. The

Coun hcrchy DENIES this n:yucst. The Court linds that the original contract section 5.::?2 to be

ambiguous on this point as a matter of law and will submit a definition to the jury as appropriate.

lssul' 5: J3y Issue 5. Zachry asks for a pretrial determination that none uJ' Zachry's

hreach of contract claims are harred by untimely notice. Previously, this Court denied PliA's

Motion for Summary Judgment that was bused on section 5.42 or the main contract. That section

provides for a live day notice period for Zachry after any interpretatiun or the Contract

Documents by any agent of PH/\ i I' Zachry considered such an interpretation to he a change to

the contract. PHA argued that section 5.42 upplied to the claims asserted by Zachry and Zachry

argued that the section Jid not govern its claims in this lawsuit. and that the section was void

under Texas Civil Practice and Remedies Code section 16.071. The Court entered an order in

March 2009 denying the .\t1otion for Summary Judgment and tinding that PI lA was not entitled

to summary judgment because it was not clear that the section was applicahle to the facts of this

case. The Court further found that the section was void under section 16.071 iJ' it was applicable.

The hasis for not finding that the section \vas applicable as a m:.1ttcr or law in t\1arch 2009 \\as that the Court felt that thL· matter was controlled hy B. F & C.M Duris Co. r. IF r:.

Cu!!ughwz ( 'on>f. ( 'n .. 2t)R S.\V. 273. 27CJ (Tex. Comm·n A.pp. 1CJ27). In its briding anJ at the

September II, 2009 h~::.1ring. PI I/\ argued that the Du\'il' ( 'o. case is neither on point IK'r

controlling because it applies to a situation wh~:r~: the contractor could bL· required to perform c

changes in the \\'ork, and the owner could unilaterally determine any ad.ju~tment in the contract

price to account for such changes. Jn contm:-;1. in this case, PHA argues, the provision is merely

:.1notice pro\·ision. not a unilateral change in the scope or quantity oJ'work provision.

;z:

The Court did not articulut~ this w~ll at the S~ptcmher 11. 2009 h~aring, but upon further

ret1e~tion and re-n:ading of the Daris Cu. case. it now understands the point that PIIA was

making: PH;\\; point is thut the Davis Co. case's "radicul change'' issue did not have to do vvith

whether a contractual notice period applied to a radical change in th~ scope of the \Vork, but

ruther. vvhethcr the radical change could h~ unilaterally imposed in the scope ol"th~ work with

littk or no change in the amount of' the C\H11p~nsation. That is. the Duris C'o. case. according to

PHA. only stands lor the proposition that an owner cannot impose radically mon: work upon the

contractor for the same price. but rath~r. such unilateral prerogative clauses only apply to minor

chang1..'S to the scope or amount of work. That. argues PI l1\. distinguishes Dul'is C'o. !"rom thi::;

case.

The Court does not see it that way. The Court still Jinds Dm·is Co. to be applicable to

this case because the clause at issue here. section 5.42. is a roundabout way of getting to the

same place. PllA argues that s~ction 5.42 is different than th~ facts of Doris Co. as section 5.42

only allows ti.!r an ~:quitablc adjustment irthcrc is a change order, which. by ddl.nitit!n, must he

agreed to by /.achry. That is to say. in the second paragraph of section 5.42. the cbusc states

that if Zachry gin:s the notice reg11rding the perceived change to the contract. the Chief" Engineer

or PHA \vill conduct un investigation and determine whether the change will necessitate a modilicution t1.1 the contract. und if so, whether to go forward. ft: and only if, the Chicl'Engine~:.T

determines that it is a change that will require u modilication. and decides to go forward, then the

Chief' Engineer \Viii (perhaps) issue a construction ch~mgc Jirecti\'e. or recommend to the c

Commission w1 equit11hlc adjustment to the Contract Price as applicable. I lowcvcr, iithe Chid

Engin~~r detem1ines thllt thL' contractor is wrong and the change pcrc~iwd by the contractor is

not actually a chang~ requiring modi ticution. the Chief [ngi neer then will contact the contr::1ctor

and ''the determination by the Chief Engineer in such respect shall be final and conclusive." ln z other words. in th~ end. it is a unilateral d~krminution by PHA wheth~::r a change. large or small.

is a ch~mge requiring modi lication to the wntract. PHi\ 's argument that a change to th~ contract

price n::quirL'S a changL' L)rdcr that is, hy de!initinn. agreed to by /:1chry bas little meaning if it is

the PHA 's Chief Engineer that retains sole decision-making authority ov~:r \vhether a change

p~rceivcd by Zachry requin:s a moditication to the contract price in the tirst pbce. That is why

the Coun believes that the Dm·is Co. case is. i r not controlling. at least persuasive. analogous

authority here. i\ section like section 5.42 can only apply to non-radical changes. otherwise. just

as in the Da1·is C'o. case, it \VOtild allow the owner to unilaterally change th~ scope of the work in

signiticm1t ways without atlording any rights to the contractor.-'

further. the Court continues to find that ~:vcn ir section 5.42 applies to this cas~:. it is void

under fe:-:as Civil Practice and Remedies Code section 16.071. PIIA argues strenuously that th~:

Court errone-ously applied section 16.071 to this section and that the Texas Suprcm~ Court"s

decision in .lmcricun ..Jirlinu.\ l:.'mpluyeus Federal Credil Union\' ..\!arlin. :29 S.W.Jd 86.97-98

(TL·x. 2000) dictates thut section 5.4:2 is not void. The Court had previously read and carefully·

~onsidcrc-d the Americun Airlines case in reaching its earlier decision thut sec-tion 16.071 applie-d

to make- section 5.4:2 void. Th~ Court has now re-read the decision and still believes that that

case is not cLmtrolling here.

First, in Aml.:'rit:an Airlines, the Courl wus interpreting: the Uniform Commen:inl Code.

anJ in petrticular. section 4.406(J) \\hic-h requires a custnmc-r who rccei\es a statement and

believes u payment \vas not authorized to nutil'y the betnk "promptly ... Thus. there \\US a separut~

statutory policy requiring noti~c being giv~:n L'!Tec-t and a statutory· prohibition on recovery.

Indeed. the Supreme Court held that becaust: notice was untimely, the claimant's recovery for

This raises anoth\.'r point. WhetlH:r or not Dm·is Cu. applies or contruls section 5.-+2. Z::.~chr:-- has arg.w.:d that it is m>L interpreting PHi\ 's alleg\.'d rejection of the l"rlv:en cutoff wall methodology as u "change." Rath\.'r, it is interpreting. the alleged rejection us a breach of the contract. l3ecause the Court tinds section 5.42 inapplicable and ;z:

void. the Court makes no ruling. on this issut:.

(,

unauthorized payments was harred by UCC section 4.-1-06. American .-lirlines, 29 S.W.3d at 9X.

The Court slated that st>ction 16.071 on its t;Ke did not nppJy because the notice requirt>ment \.vas

not a requirement to give notice for a claim for damages. Likewise. in Community Bank & Trust.

S.S.B. \'. Fleck. 107 S.W.3d 541. 542 (Tex. 2002) the Supreme Court reaffirmed its holding in

Ami.!rimn Air/if1(:s. It noted tbut under Texas Business and CommcrCL' Code section 4. 103( a) a

bunk and its customers may agree to u specific. shorter. re::~sonablc period within \Yhich a

customer must giw not icc or unauthorized payments. Jd. The Court reitcrutcd that section

16.07 I did not apply to bank deposit agreements because the notice was nol notice l)l. a claim lor

damages. but rather. notic.: ol' the unmllhoriZL'U transactions. !d.

In contrast. in this case. then: is clearly a clause in section 5.42 that requires notice or an

interrrctation of the contract that the contractor bclicved to be a change in the contract. That

section states that '·[a]ny notice not timely made by the Contractor shull he deemed a wai\·cr by

the Contractor of its right to assert a claim in respect or such interpretation:· It is not analogous

to the Americun Airlines or Fleck cases cited abuve. As a practical matter. \vhat this clnuse says

is that Pili\ can totally rewrite the requirements of the contract anJ i!" Zachry docs not like it,

7.achry has lo gi-vc notice of its disappwval within 5 days. ~mJ the failure to do that under the

langunge quot.:d above bars their clnim. Thal is not practically different than saying that PI!/\

can hreach the contract and Zachry would have to gi vc notice of lhL· breach vvi thin fiv-e days.

That is precisely bow PI !A is treating sectinn 5.42: as u Jcl'ense to 7.achry·s claim th:1t the

rejection of the frozen cutoll'waJI design was a bre<1ch. It is. to the Court, a distinction without <.1

di rrerencc.

:v1orec)\'cr. the clause docs not rc<tlly have some other salutary dlccl as described in the

.1mericun .lir/ines case hecausc the Chief [ngi neer. and thcrdore PHA. has the tina! sa, on wh~ther hL' or she thinks the '"change" to the contract is signilicant. In contrast, in .4murican

Airlines. the statutory purpos~ for the notic~ was to try to pn:vent further unauthorized charges.

In this case. o. "change·· to the contract ond a breach of the c~1ntracl may well be

indistinguishable. and thus the section could bL' r~ad (indL·ed. is being read by PHAl to require

notice ofZachry·s claim for damages li.)r breach within live days.

\Vhik ostensibly the notice re4uirement concerns notice of a perceived change to the

contract. that docs not negate the plain bnguage quoted above. To folluw PHA"s argument. any

time a clause has a notice requirement for any purpose in addition to u claim for damages, it

would be outside o!"section 16.071. That is not what is intended by section 16.071. nor how it

has been interpreted for the last R5 years. In ( 'iti:::ens · Gzwranly Siu/1! Bank (!lHwdzins 1'.

Sationul Surely C·u .. 258 S. W. 468, 4 70 (Te:-;. Co nun· n. Apr. 1924 l the court st::ncd. in

construing the predecessor statute to section 16.07 I:

The company contends that the bond in this cus~ requires. as o. condition precedent to suit. ml.!rely a notice ·ol· any loss in respect or which liability ol· the company is claim~d.' und that this is k~s than notice of a 'claim.' or Ci:lusc of action, fur damages. It may he; · but it' the force of the statute is to be avoided by requiring notice. not of the cause or action itself. but of necessary and component parts or the cause of action. its purpose can be too rcudily defeated. for instance. instead of using in a pro\'ision the exact words or the law. ·notice * * * of* * * claim J'or damages.' a surety company. assuming c~mtractual liabilities and dutiL'S. might n.:ach exactly the same result by stipulating either for· notice of defalcation· on the one hand. or lor ·notice ol' damage' on thL' other. Neither element would constitute the entire cause or action. but requiring notice of either would he as effective a limitatiun as requiring ll(ltice of the whole causl' or action. The spirit or the statute is a liberal public policy. ami excludes <in C\asion of' that nature. hoWe\er UnC011SCiOUS On the pari Of th~ CU111pi.l11)'. and regardless uf quL'Stions Of l'Xpediency in J particular line of business. It d1)es I1lll permit a tendency ln rcla;;ation. but Jem:mds strict obL·dience.

In Lmhmnl'. :\fountain Stalt:.\ :\Jut. Cus. Co .. 482 S.\V.2d 655,658-59 (Tex. Civ. Arp.-

1

llouston ll ' Dist.] 1972. writ refd n.r.e.). an insured under an automobile policy was required tu

lile a sworn statement with the company stating that he hJs a cause nf action for damages arising

from an accident with an uninsured which~ within 31 duys. The insurer argued thtH this clause z was a non-waivablc part ofthc clt:tinition ora hit and run vehicle. !d. at658. The CLlUrl. quoting

the l.:mgungc- from Cili::ens Guaranty Bank above. concluded that regardless of the fact that it

\vas ostensibly part or a definitional paragraph. it was nevertheless a condition precedent to a claim lor damuges that was voiJ under the predecessor to sc<:tion 16.071. !d. at 659. Of course.

a purpose ot'the notice requirements in insuram:e policies is, as in this case and in Amaican

Airlinl's. to allow the non-claimant to investigate the matter. Nevertheless. under !.at ham. that

notice rl:'quircment alsu acted as a conditiun precedent to a claim for damages. and was found to

he void. Likewise. the language regarding wain:r or a claim ir notice is not provided under

section 5.42 is void. Were that not so. then artful scriveners coulJ too easily moid the

constraints of section J 6.071.

finally. the Court has also read and considered .\t. Puu! Afercwy Ins. Co. r. {ri-.'.'tatc

Cau !u Feeders. Inc .. 63 8 S. W .2d 868 (Tex. 1982 ). That case and its progeny, dealing with

notice of a loss in the insurance context. have creat~d a distinction between notice or a claim for Jamagcs and "noticl' of the h:1ppening ol'~m event upon which liability may or may not result:· 111 Ri£(1!;/l'£1 Fsrute C'oncluminitllll .·Iss ·n 1·. l.exilllgon Ins. ( 'o .. 41.5 F.3d 474. 478-79 (5 Cir. 2005).

Here, however. the facts are di1Tcrent. and s~:ction 5.42 is not ~malog.ous to an insurance policy

pruvision rcquiring notice \•f an event of loss or damage. Section .5.42 is more akin to m::1king a

claim against une · s insurance company alter it has denied covcruge under one· s policy. Section

5.42 is actually heing read in this case by PHi\ to equate what Zachry perceives as a breach or the cuntr;!C( as a "clw..nge" in the eontracl requiring notice ofthc alk:ged "breach" to have been

given within live days. Thus. it is not notice of the happening of an event upon which liability tr, C"l may or may not result. Rather. it is being employed by Pili\ to require notice ot'the claim t'or -:1' 01 <r, r..., li::1hility in breach. Because section .5.42 may be read. and is being. r~:ad. tn bar a claim f\.lr an -:1'

alleged breach of contract by Pili\ it' noticL' or the alleged breach itself is not given\\ ithin five

C)

days, the section is void under section 16.071. for these reasons. the Court \vill GRJ\l\T

Zachry's Rule l66(g) motion for pretrial dckrmination as a matter oflmv on this Issue as \\"dl.

Tube clear. the Court hereby tin<..ls section 5.42 INAPPLICABLE to the !';)cts Pi' this case. and

VOID umkr Texas Civil Practice and Rcm~:dies Cod~: scctinn.\6.071.

Issue 6: This question seems easier to the Court than this issue of the applicability

of section 5.42. The (\lurt hereby 0 RDERS as a matter ll I" law that section 5.41 of the original

contract did l\!OT permit PHA to reject the use ofthc rrozen cutolTwall design because that

section only allowed unilateral chunges hy the Chief Engineer if they \vere minor changes in the

Work.

Issue 7: Zachry usks for a prl.!lrial determination as a matter of law tbul ~my alkged

pre-contracwal stmcments nrc not. as u matter of Ia\\". part pf the Contract and cannot. therefore.

he the basis for any prior material breach. Further. Zachry asks h.>r a pretrial dctermin<ltion that

any such alleged pretrial statements cannot be the hasis for :my fraudul<.·nt inducement defense

hy PIli\. The Court hereby CilZA.:t\TS Zachry's request on the prior material bn:ach aspect of

Issue 7 because PHA states in l()otnotc 25 on page 59 of its Response that it never contended that

any prinr misrL·presentations by Zachry arc part tll" its prior material breach defense. The Court.

consistent \Vith its ruling on Issue 2. ahovc, hcrehy DENIES Zachry's request in this fssue

[JC11aining IO Ji":.JUJulent indUCt'l11C!1l dcspilt' the alleged presem::c o!'a merglT clause.~

Issue 8: By this Issue, Z1.1chry argues thut PI I:\ cam1Llt 1.1ssen its pri~lr material

breach dct<..·nsL'( s) becuuse PliA eke led to trL·at the contract as c<.lntinuing ana Zachry· s alleged

prior breach. PI I/\ argues that becuuse the original contract contains a no-wuiYer clause. even

upl1n electing to treat the contract as continuing, it may still aSSL'rt its prior muteriaJ breach

' Tile Court is concerned that severJI of the statement> listed in footnotl' 29 on page 27 of Zachry·s Motion appear tube puffer:-· and potenrially. therefore. not actionable. N-=vertheless. without mon: context. it is difficult lL' determine \\·hether they rise to the level of being at:tionabk. and the Court will. <Js of this nwment. tiH:n:lixt:. defer :z to tht: jury on the iSS Lit' of fraudulent inducement.

]()

dcfensc(s). Zachry. in tum. argues that the concepts of election and waiver ~:m; distinct. and that

the non-w:J.iver provision of the contract Jnes not save the prior breach dt:>fcnse(s) for PH/\ as a

result or PH/\· s dection. Zachry argues that PI IA is not entitled to he excused from

performance. and that by deciding to go l"l1mard with the contract after the alleged breach(cs) by

Zachry. it may not now assert its prior material hreach ddi;nse. Thus. argues Zachry. "in order

to ;1\·ail itself of this prior material breach dcfcnsL' und excuse its O\\ n nonperformance. the Port

nei..'Jcd to haw terminated the Contract J.i'ti.:r any such alleged breach hy Zachry."

\\iithnut penning a treatise. the Court \\ill attempt to reconcik thL· two concL·pts \'ery

briclly based upon its reading of the authorities citL'd by the parties. /\t first. the two concepts

:seem somewhat contr:..~dictury. hut this is hO\v the C oun understands them: In J.ung !I-!and

Sarings Honk. FSB \'.U.S. 503 F.Jd 1234. 1253-54 (Fed. Cir. 2007), the Court stated. ·'lw]e

have held that through its continued pcrrormancc Df the contracl. ra non-breaching party I rmay

w::~ive] any c!aim t"l1r prior material breach." (citing Barron Bannhures. inc. \'. l/niled .\'!ales.

366 F.3d 1360. 1383 (fl'd. Cir 2004)). Hut. in Gu/)ta 1'. r:a.1'1L'rn idaho Tumor institute. inc.. 140

S.\\'.3J 747.757 n. 7 (Tex. !\pp--llou~tnn [14 111 Dist.j2004. pet. denied). the court noted that

"! tl he election atrects only whether the non-bre::~ching party itsel r is then required to perrnrm

t'ully." (citing Chillunlns. Co v. f>ale & Pule Fn~crs .. inc.. <no S.W.2d 877. 887-88 (Tex. !\pp.-Sun Antonio 1996. writ Jenicu)).

I !ere is how the Court undL·rstands these Cl)ncepts to work under the allegations in this

case (which may ur may not be correct statements or the facts. and are presented for ill ustratiw

purposes only):

Srep i. /.aclzry a!feged!y hn:aches the mntmctfnr/(Jiling ru.jill· C.\"011/fJ/e. adhere to 1he

srundanl o(t·are re,fuircmc:nts o(rhc conrracr.

Step]: PHA. c:lecrs at rhar time to conlinue to requin: /.acluy to perform.

z

.)'tep 3: Because r~j"this election. the case /mr seems ro indi<:utc tlwt PI /A may nmr vn~r

sur.!jhr damages caused hy the fWtliu/ hread1 hy Ladu:1·.

.\'tep -1: PHA. hy hm·ing r.!ledcd In cuntinut' to l"t'Cfllin! pertimmmcc. t'amwr nm1· claim

Ihut it is unda no reyuiremcnt to C(Jn/inue lo fH!r/imn us if deL'Icd to continue to reyuire l.w:l11y

to pcr(vrm.

S'ter 5: I' f!A u/feged~r hreuchl!s hy riolating sue/ ion 5. J()or hrl!ac!Iing Change Order -1.

.')'fep 6: Laclu:1· can suu.fin· hreach hy FHA.

S!ep -:': 1/rmcwr. di!spitc irs c:!ectiun. I) I !..J. can sli/1 claim prior mafurial hreach hy

Zaduy (the earlier alleged hreachfor/(Ji!ing to wllzere to fhl! standard1 olean· under the

contract. fin· example) hecuuse o/nun-wain'r clause und potellfially ulherfw:l issues on 1raira.

Thus. as a great simplification. the (\lurt hclievcs that in light of the non-\vaiver

provision in the original contract. the (\)Urt c~mnot finJ as a matlL'r or law that PHt\ \\aivcd its

right to assert its prior material breach de tense by continu~J acceptance (and requircm~nt) of

performance hy Zachry. Pll.:\ is permitted to claim that Zachry·s damages for breach arc

precluded hy Zachry's alleged prior material breach.

ThL· election issue docs not seem to bar the prior material breach dcknse to Zachry's

claim for breach and damages. Rather. the election issue pertains to whether PIIA can

artirmatively claim a total breach hy Zachry, nr whether it can cluim only Jumagcs caused hy

Zachry's alleged partial breach. That is. under the case law. the election issue docs not seem to

0 perwin to PI !t\ 's right lo assert a prior material breach b.Y /achry as a defense to its own breach. 01

In ract. CaSL' law cited by Pl !A states the opposite· that il' a 11011-\\<li\'cr pro\·isiun is present.

allowing continued perlormruH:e by the breaching party is not necessarily a waiver hy the non-

brL'aching party. The election issue seems limited to PHA's right to claim a total breach or a

pmiial breach and its ability to s~ck damages rdating only to the purtial breach.

z

l'

The Court has not seen 11 case that stands squarely t\.1r the proposition th11t in the facL' or a

non-waiver clause the elecfion by the alleged second-breaching p11rty to continue with the

contract eliminates its ability to assert a prior material hreach as a defense to its own later breach

as a matter or lmv. The Court is not certain whether it has a finn grasp of h~1w these two

con<.:L'pts intern:lah:, and is open to reconsidering this issue later, but for now, believes Zachry is

not entitled to an ·'as a matter of lmv" finding that any election by PI IA prL'cludes the assertion ol'

its prior makrial bre::~ch defense gin:n the presence of the non-\Yaivcr clause. The Court hereby

DF:N IES Zachry's Motion on this Issue.

Issue 9: The Court hereby G!Z..A.)JTS a pretrial determination as a matter oJ' ]a\\.

that Zachry owed no tiduciary duty to PI I;\ 11s PHA has repei:Hedly stated that it did not claim a

fiduciary duty \\Us O\\ed t~1 it hy Zachry. The Court hereby DE~IES Zachry's \-lotion to the

C:\tent it contends. otherwise. thut as a matter ofla\V it mx.:cd no duty of full disclosure under

other concepts of law including. but not necessarily limited tll. concepts like partial disclosure.

Yoluntary Jisdosure. and/or contractulll duties of disci osure.

Issue 10: Zachry contends that the rcl'ormation clause is invalid in that it is an

unl'nli.)rcellblc agreement to agrL'L' in the future. Pili\ argues. in C\l!1nection with section 5.4.".: of

the contract. that it should be rdormed. first. as stated i.lbow in connection \Yith Issue 5. the

Court linus that section 5.42 is inapplicahk to the alleged rejectinn of the frozen eutolTwall

design. Second. thL' Court hereby ORDERS that tlw reh1rmation clause is an unenforceable

0 agreement to agree even if section 5.42 were applicable- to the rejection or the frozen cutolr wall.

and therefore. the Court hereby CHANTS Issue l 0 in Zachry's l~n·nr as a matter of !Jw. Finally.

the Court hereby DENIES Zachry's Motion to the extent it seeks a ruling as a matter of law that

the reformation clause is burred by public policy.

z

1i

Issue 11: The Court finds that section 5.06, the liquidated damages provision, is an

unenforceable penalty because it does not make clear that the liquidated damages arc in lieu of

other damages. This is a question of law for the Court, and the Court finds that Nexsrur

Broadcasling. Inc. d'b.;a KBTV NBC' ..f v. Gray. N. 09-07-364-CV. 2008 WL 25:21967, *2-*3

(Tex. App.-Beaumont June 26. 2008, no pet.) is controlling. The purpose of a liquidated

damages provision is to allow a party to n:cover damages where. at the time of contracting. it is

difticult or impossible to a..<;certain an amount of damages as a reasonable forecast of just

compensation. !d. at *3. The contract has to make clear that the amount ofliquidated damages

will be in lieu of other damages. HirdH"ell r. Ferrell, 746 S. W.2d 338, 340 (Tex. App.-Austin

1988. no writ). This one does exactly the opposite by allo\.ving the liquidated damages to be a

minimum, and allowing PliJ\ to seek its actual damages instead if they exceed the liquidated

damages amount. Section. 5.06. There is no practical distinction between the contract in this

ca..'>e, and the contract in Nexstar even though in Nexstar the contract used the term "additional

compensatory and consequential damages." 1lwugh unstated in this case, the language in

section 5.06 permits the exact same approach by PJ-IA. The Court grants Zachry's request in

Issue II as a matter of law, and hereby ORDERS that the liquidated damages clause in section

5.06 is unenforceable as a matter of law.

All other relief specifically requested in Zachry's Motion for Pretrial Determination of

Issues of Law and not specifically granted herein is hereby DENTED.

c

Signed thi.s _-_5__ day of October, 2009.

Judge Mike Engelhart

TAB 6

Order Granting in Part and Denying in Part Plaintiff's Motion to Strike the Port's Offset and Withholding Defenses dated October 16, 2009 (CR51:14948-52)

P-5 STPLZ

CALISE NO. 2006-72970

ZACHRY CONSTRUCTIO!'\ § I~ THE DISTRICT COURT OF COHPORATJON § § HARRlS COtJNTY, TEXAS v. § § PORT OF HOUSTO~ AUTHORITY § .

FILED Loren Jackson OF HARRIS COl.JNTY, TEXAS § lSl sT JllOICIAL DISTRICT District Cieri<.

OCT 16 2009 ORDER GRANTlNG fN PART AND OENYlNC IN PART . 9 . (~. PLAINTIFF'S MOTION TO STRIKE PLAII';TJFF'S MOTIO!Ql · -k~~~=----­ TO STRJKE THE PORT'S OFFSET AND WITHHOLDI~G DEFIS '

Came on for consideration Plaintiff Zachry Construction Corporation ·s (Zachry) \11otion

to Strike the Port's Ofl"set and Withholding Defenses. The Court, having considered Zachry's

Motion. PI I/\· s Response. PHA ·s suppleme-ntal hricf and Zachry· s response to that supplemental

brkr. as \veil as the arguments of counsel. is of the opinion that Zachry's Motion should be

GRANTED 1!': PART and DENIED Jl'>! PART.

The Court will not go into thl? timeline of \.!Vents. as those arc spelled out in minuh: dctai·l

in the p:mies· briefs on this issue. The (Llllrt will only generally note that. in sum. PHA only

li<;;ted A~Y amounts (other than the S600.000.00 dredging issw:) of its i.ICtual damages that it

pruposetl to serve as an onset in lmc July 2009. ll owcver. the legal theory under which those

quanti 1ies were I is ted was ON I. Y the proportionality l)f its Iiquidated damages ollset daim to

actual damages. Additionally. PHA had timely disclosed $600.000.00 in actual damages much

earlier as part of an Ol'fset claim pertaining to ccnain dreJg.ing costs.

To this day. PHA has not enunciatl.!d in any discovery fl'sponse any legal thevry that it

was Sl'l?king to dcCcnsivcly offset or recoup /\NY actual damages othc.:r than the S600,000.00

amount. /.achry nlkgedly on ly karned of PI I/\ 's apparent attempt to inject first s;g million and

then $10.5 million in actual damages (as opposed to liquidated damages) as a Jefensiw daim for

otrset inl\.)rmatly. und nul through any supplcmcntati<.m nf di:-;c\1\"cry. such as a supplement to a

2

n:quest l~)r disclosure und~r Ruk 194.::?.(c). The Court stated at a hearing that th~.: surprisl.! to

Za(;hry was not that PHA was seeking an onset. hut that it was seeking to oll'sct a long list of

it~.:mizcd actual damagc:s ns opposed to liquidated damages . It is important tn note. again. that in

quantit~· ing its "harms·· in July 2009. PHA \\'U:i not :::wting. that it would <ll..:tually b~ :>t:d;ing, to

rcc(wcr those quantities for those specific cat~.:gorics of h<trms as an tll"lsct. 1

PIIA cnum:iatcs a plau~ibk theory in its supplem~.·ntnl brief that it (.'()uld only know about

the tl:ndcr resurrncing costs of upproximar~.·ly $1 million somewhat more recently. and also

points to costs for dearing and grubbing or roughly $::?.5.000.00. The Court believes that in

addition to the $600.000.00 dredging issue. PI I/\ ought to be able to put on <:vidence to seek to

shov,: it was t:nlitkd to ol"fsct thesl.! amounts only.

It is well understood. in the Court·s ,·iew. that TRCP 194.1(dl applies to both anirmatiw

claims ti.1r damages. as well as to quantitiahl~ ddem;ive tht(Jrics. Ir this had he~n a car accident

cas~. and the defendant \\'as seeking to oiTset or r~coup Sllme amount against the plaintifC::;

affirmatiw claims for mt.:dicall:!xpenses. pain and sufrering. disfigurement. t::tc .. the d~fendant

would not he abk to simply list .. harms·· or catt:gories or offsets (like '·property damage"') but

would have to actually list the amounts and bow those amounts were calculated. Zachry has

poi ntt:d out th~t comment 2 to the 1999 c.:hangt.: to Rule 194 applies to dd'cnsive thcorit.:~ of

liability and damages as wdl. Tht: sam~ is tme in this mor~.: complex case.

PI I/\ argues that this Court·s ,\lfarch 2009 ruling denying Plaintifrs motion for summary

judgmt:nt on the enforceability of tht.: liquidated damag~s clause o!' the contract excused it rrom

pleading and ~nunt:iating in its disclosure responses this altcrnatiYc theory of actual damages.

The Court wants to be fajr, as always. hut if anything. the suggt:stion by Zachry by its motion

1 Indeed. PHA abo argu~s that it stated that ils $2.3 million in liquidott'd dnmagt's Jhat it had bt.'l'n enum:it!lin,g ~

bcli~vcs is required by Rult' lQ4.1(u).

-

throul!hout the ca~c would continue to accrue. But, PHi\ did not even do tht' math on that fil!.urc as. tht' Court

3

that the liquidated damages clause may not be ~nfon:~able should haYe akrt~d PHI\ that it

nceJ~d to plead this th~ory and enunciate it in terms of the h:gal theory and amounts in its

di::;closuri:! respL)ns~s. Further. Zachry again sought to diminatt: the liquidated damages claim by

its Rule 166g \!lotion on or about July 31. 2009. and PHA still has not amendt:d its Ruk 194.2(c)

di~closur~ r~spon:se to ~num:iate an actual damages theory of oiTc;ct or rcwupment. nor sought

leave to do so. to the Court's knowledge. Pllt\ ·s inclusion. long ago. or till' S600.000.00 actual

damages figur~ us purt of its offset claim also highlights that PHI\ should hav~ included all of th~

other catt>gories and 4ll<lntities or onset~ wdl bdon: the discovery cutotT.

The Court at rJ1e Ot:tober 9. 2009 hearing. nwught up the idea that the Court's October 5

ruling striking PH t\ · s liquiJatcJ damages l'laim changed the landscape. and that tht'refore.

p~rhaps. as a matter of cyuity. PHI\ ought to be able to ass~o:rt its actual damage daim. Th~ Court

has thought and thought about this. and concludes that. ut this point. the equities are not on

PHA's side for the reasons discussr:d above. further. th~.:re is too much cvidtnce--us suggested

by what is NOT said in P.HJ\'s supplemental response ofV/edn~.:sday. OctL)her 14.2009 <m this

issue--that PJ lA knew ol' both the exist~ncc or th~.:se actual dumag.cs. and th~:ir approximate. if not ~xuct. dollar ammmts no later than 2008.

The Court disag.rct:s thut Zachry \\as obligatl!d to move to strike PH/\ ·s ··claim" for

<~ctuul damages as offset by the dispositive motion deadline. Sec. 1/oopC'r \'. <. 'hillaluru. 222

S.\V.3d 103. 110 (Tc:-;. App.- llouston [14111 Dist.l :2006. pet. denied) (holding. in a discovery

supplementation dispute. thnt the plaintiff ~.:ould not hav~ supplemented Jiscovery with the other

sid~·s expert's opinion~ until those opinions were given to the plaintiffhy the othi:r sidl.!'s e:-:pert -the plaintiff is not required to do the impossible). Analogously. here. Zachry could nut move

to strike PH/\ ·s actual damages offset claim until that claim was .. made:·!

PHA makes an interesting. argument th:tl Rule l93 .5(b). which gov~::rns supplt!mcnt::nion

or discoYcry. re4uir~d them to amend nr supplement tl1cir discovery rcspl1nsc:> only r~asonahly promptly after they discovered the necessity lor such a respon:>e. That is. PI I/\ argues that they

did not know of the need to enunciate that they would be seeking actual damages as an offset.

nor the amount or those actual damuges because of this Court's denial of Zachry's Motion for Summary .Judgment in March 2009. Further. in light of that denial. PitA conll.:nds that it did not

know that its liquidatl!d damages claim \\Ould be eliminated until Ortohcr 5. '2009 when this

Court struck their liquidatctl damages clause as in\'alid. The Court has largely dealt with these

arguments above. but will reiterate: The riling of the Motion for Summary Judgment, at the

latest. put PH/\ on notice that its liquidnted tlamng~:s clause in the contruct was not ironclad. ThL·

tiling of the (essentially) r~newcd motion w eliminate the liquidated uamag.~~ claim tlll or about

July 31. '2009 should have <.:aused PHA to umemlthcir discovery responses to spt.:cititally

cnu.n<.:ime an :Jctual damages ofrset claim. ar least as an alternati\'e. Pll/\'s cont~:nrion that they

basically disclosed this theory of offset 1actual damag~s) in .July :2009 is ju.st not faetu:JIIy or

kgally correct P1 IJ\ disclosed a qunnlily of actual damages in late July ~009 !hat they were

!'JOT going tP submit to the jury as an offset. They never haw disclos~d :.1 deft:nsivc claim fur

oft~~~ oftlwsl.' actual damages w date.

The hottnm line is that w inj~ct .S 10.5 million in actual damages tor ot1sc-ttlr recoupm~nl

well after all discovery deadline!> hav~: pass..:d \\.llUid dri.lrnatically change rh~ landscape l)fwhm

promises to he u lengthy and Clllllplicated tria!. It is not fair co ask either side t0 ~ngage in \\'hat

the Court pl.!rcei\'I:'S would bl! ext~nsivc discoYery (including document production. depositions.

: Agilin. n ~pt:dlic cluim fur nctual damages ilS on offset or recoupment hils. to datt'. only infornmlly hccn made. and nQt spt:cificolly pkad or pres~ntcd in a suppknu:ntcd di!>clnsurc rl·~ponsc.

and potL'ntially adoitionul ~xpert witn~sses) on the evidentiary bases tor the amounts sought to bt:

orfset by PH/\. The results or that dist:overy ·will not be known until long atkr voir dire and

opening stakments. and the trial Court will ntH allL'W that much lluiJity anti uncertainty intL' this

triul.

It is therefore OR.DfRED that. with the cx<.:eption of the $600.000.00 umount for the

dredging matter. the S1 million or so for the fender n:furbbhing. and the $25.000.00 or so lor the

dearing and grubbing. PHA"s otl->et '"harms" or categories. a!i \veil us tht..: amounts or those

alkgcd offsets are hcrehy FXCJ.UDED from th~ trial ol.this tause. And. as with any other

claims. the Court does not hereby Jccidc that !iaid daims wilL in fact. end up being submitted to

th~ jury- -just that PHA may put on evidence of them.

It is further ORDER ED that PI It\ will immediately supplement its pleadings and

discovery responses to the extent tbat it has not Jisclosed an actual-dumagcs defensive theory of

olrsct nr recoupment.

It is further ORDERED that i'.achry will promptly propL'!:ie to tht> Court rcasonabk

discoYI.!ry that it wishes to <.:onduct nn these tht'orics and umounts ofoiTsd or recoupment.

_ 6_ da~· of October, 2009.

Signed this __1

Jm r:_ {/l/i/v' Judge :-.'like Engelhart

TAB 7

Order on PHA's Request that the Court Reconsider Its November 12, 2009 Open-the-Door Ruling Regarding the Port's Actual Harms (1SCR6:1112-17)

• CAUSE NO. 2006-72970 • FLk!ARE~~ DfBirlcl Clertt

DEC 11 Z009 ~

ZACHRY CONSTRUCTION CORPORATION § § IN THE~ § HARRIS~O~AS v. § § PORT OF HOUSTON AUTHORITY § OF HARRIS COUNTY, TEXAS § JSJST JUDICIAL DISTRICT

ORDER ON PHA'S REQUEST THAT THE COURT RECONSIDER ITS NOVEMBER 12, 2009 OPEN-THE-DOOR RULING REGARDING THE PORT'S ACTUAL HARMS

Came on for consideration Defendant PHA 's Request that the Court Reconsider its

November 12, 2009 Open-the-Door Ruling Regarding the Port's Actual Ham1s. The Court.

having considered PHA 's Request. Plaintiffs December 10, 2009 Response, as well as PHA's

Supplement to its Request and the arguments of counsel, is of the opinion that PHA 's Request

should be DEN JED .

The issue in this Request is the application ofTe)tas Rule of Evidence 107. Underlying

the request, generally speaking, is the following aspect of this trial. Under prior rulings by this

Court, Zachry hus to prove one or more common law exceptions to the no damages for delay .

clause contained in the Wharf and Dredge contract made the basis of this suit in order to defeat

that clause. One of those common law exceptions is referred to loosely in this record as the "bad

faith exception,'' and Zachry contends that a certain promise that PHA 's Mark Vincent allegedly

made in an internal PHA e-mail, and which PitA then allegedly breached, is evidence ofbad \() ...... 0 faith on PllA 's part. The promise, according to Zachry. was essentially that, as of May 2005.

PI JA would not charge liquidated damages ifPHA suffered no actual losses or harms by the time

the Chinese crane ship--scheduled tor first February 2006 and later May 2006--arrivcd.

In contrast, PH A e<:mtends that if any such promise was made. it related not to the date

tor the Chinese crane ship's arrival. but to a broader, more onerous Milestone A deadline, and cv E ::I 0 0 Cl "0 v t.= •t: v ()

: 01112

• • potentially, the fi nal completion deadline. That is. PHA 's position is that if any "promise" was

made regarding liquidated damages, it was thot no LOs would he charged if PI lA sutlered no

actual damages or harms 1hrouglz the Milestone A deadline or, possibly. the eventual fina l

completion date of January 2009. It was not, PHA argues (if any promise was made), limited to

the date of arrival of the Chinese crane ship arrival.

Thus, PHA 's position is that the discussion by Zachry of the alleged "promise" not to

charge liquidated damages at all, coupled w ith ( I) the Andy Anderson April and May 2005

letters which mention the final completion deadl ine, as well as the "milestone'' deadl ine, and (2)

Mr. Abiasi's recent testimony about ships routinely docking at the wharf during 2006 and 2007

(and possibly later), have opened the door to the introduction of evi dence by PHA of all of the

alleged "harms" (actual expenses and losses) allegedly suffered by PH A. T his discussion, PHA

contends, is necessary to rebut Zachry's bad fa ith aq,rumcnt by showing that, in fact, there 1\'ere

actual ham1s suffered by PHA. Therefore~ the arbrumcnt continues, even if thejury believes that

the promise related to the crane ship arrival or the Milestone A deadline (which PHA argues is a

much later date), PHA did in fact suffer actual harms. Thus, PH A contends, they did not hreach

any alleged promise because they indeed lzad actual harms. Indeed, they argue, if there was any

promise, they lived up to it.

Texas Rule of Evidence I 07 - Rule of Optional Completeness

Under the case law pertaining to TRE 107. the Court believes that the door was opened as

to the discussion of actual harms up to the date of the May IS, 1006 letter in which PH A

communicated that it would charge liquidated damages. It is logical to conclude that it was on 0 \0 00 that date, at the very latest, that PHA decided it would charge liquidated damages, and at that 0\ 0

; therefore, under either version of the all eged promise (whether it wa<; the date of the Chinese ;..; u .D E crane ship arrival. or the date of Milestone A completion), it had suffered actual harms at that :::s z cu E :::s u 0 Cl -o 2 0 t;:; '€ <3 ~ 01113 • • time, or reasonably anticipated such actual harms to necessarily flow from the alleged delay.

Otherwise, it would not have decided to charge liquidated damages at that time in light of either

alleged version of the alleged promise (if there was uny promise at all).

Given this, the Court believes that the discussion of (I) the Andy Anderson letters of the

Spring of2005. and (2) Mr. Vincent's e-mail as the basis of the alleged promise not to charge

liquidated damages, and (3) Mr. Abiasi's discussion of the ships arriving rc&'Ularly after the

Chinese crane ship· .s arrival, is the same subject matter as PI!A· s alleged hann.s that were both

actually incurred, and reasonably expected to be incurred as of the date it sent the May 15. 2006

letter charging liquidated damages. See, Williams \'. State, No. 12-01-0020 1-CR, 2003 WL

356010, •s (Tex. App.-Tyler February 19. 2003, pet. ref d) (not designated for publication). The Court also bcliev<...'S that the discussion of the promise and the other ships· arrival uftcr the

Chinese crane ship's arrival could have leH the jury with the misimpression that PHA suffered

no ac:wal harms that underlie their decision to charge liquidated damages on or about May 15.

2006. !d. Thus, the test under TRE I 07 would seem to he .satisfied. 1

1t is important to note that in response to the Court's earlier "open-the-door" oral ruling,

in which the Court stated that Zachry had opened the dollr allowing PHA to discuss evidence of

"any harms that occurred up to the date of the crane ship arrival," PHA stated that it had no

dollar amounts of any harms it had actuall y sutlcrcd as of the date that the Chinese crane ship

had arrived. Very recently, however, PHA hegan to ar&'UC that while it had not suffered out of

1 fun hcr. thflugh PHA 's counsel has pointed out thai this rea:>oning docs not seem 10 underpin C3Sl' law pertaining to TRE 107 (but rather, it applies to case law regarding trial by cons~nt). it is worth noting that the eviden~e of the: :;hips r~gularly arriving at th~ wharf during the ongoing con!'truction that Zachry adduced through Mr. Abiasi is rdcvant to rebut PI! A's allegation that Zachry took far too long to complete its work. Zachry says th!! cvidem:~ of ships arriving during construction, and Zachry's accommodation of those arriving ships. explains some llr ollllf the delays. Thus, 10 be fair, the cvidcnvc was aT!,'Uably not adduced Ill show that Pl lA sufTcrcd no hanns because ships could arri\'C at the wharf. Rather, it was adduced, in Zachry'!\ view, to c.1tplain the delays of which it was accused hy PllA. So therefore, argues Zachry. it did not really OJXn the door because the cvidc:ncc: has rt:le\o·anc<: 10 somtthing other than PHA 's alleged ha rms. PHA nonetheless argues that it do'<s not matter why it was introduced, out that the only consideration is the jury's potential misapprchen:>ion.

=01114

• • pocket losses or harms as of the date of the Chinese crane ship's arrival, it knew at that time that

it would necessarily suffer actual harms that would actually be incurred after that date. Why

PHA did not ask tor clarification of the Court's oral ruling to determine whether anticipated

harms ofwhicb it was aware as ofthc ~ate of the Chinese crane ship arrival date were included

in that ruling is unclear. Nevertheless, it is possible there is evidence of reasonably anticipated

actual harms of which PHA was aware as of the May 15, 2006 letter charging liquidated

damages. The Court has not heard this evidence as of the date ofthis Order.

To be clear, however, the Court believes that the door has only been opened to a dc1,rree.

It has onJy been opened to the extent that, if the Court were to allow the evidence to come in, it

would only do so to the point where PHA could discuss discrete categories of actual harms.

However, the Court would not al low PHA to discuss the specitic dollar amounts or quantities of

those alleged harms. Eliciting evidence of the types or categories or actual harms, the Court

believes. would allow PHA to correct any misimprcssion held by the jury that PHA suffered no

actual harms which would underlie or support its May 15, 2006 decision to charge liquidated

dum ages. There is no need to go the additional step of discussing the actual amounts of those

alleged harms.

Texas Rule of Evidence 403

Now, despite having opened the door to the discussion of the actual harms either actually

incurred as of the date of the May 15, 2006 liquidated damages letter, or those reasonably

anticipated as of that date which necessarily would have flowed from the alleged delays up to

that date, the Court believes the evidence should nevertheless be excluded under Texas Rule of 0 \0 00 Evidence 403. Zachry has also expressly objected to this evidence on Rule 403 grounds.

0\ 0

~ First, the Court~ at the outset of the. trial. ruled that other than 3 specitic categories of ;_: Q) .D E actual harms, because of late or no-supplementation of discovery, PITA would not be permitted ~ ;z: cQ) E ~ 0 0 a 4 13 t.:: ·t: Q) u : Ol111~ • • to discuss 8 to 10 million dollars worth of alleged actual harms. Without modifying that ruling,

the main rcas~m for that decision was that the Court did not want to-at the last minute--

fundamentally alter the nature of the trial by adding many days or weeks of testimony about

whether those alleged harms were actually suffered, and in what amounts. Moreover, the Court

did not want to disrupt the trial by having the parties have to undertake substantial amounts of

discovery in the middle of what already promised to be a lengthy trial. At bottom. it would have

been unfair to inject all of that evidence of about $1 0 million worth of an offset claim by PHA

into the trial at the last moment. The Court does not believe that there is any basis to change that

ruling.

Second, undc=r Rule 403 , the Court believes that any probative value of injecting al l of the

evidence of alleged hanns into the trial would be substantially outweighed by the danger of (I)

unfair prejudice to Zachry, and (2) considerations of undue delay. In particular, not only would

it take a lot of time for the information to be elicited in the tirst place from a PHA witness. it

would necessarily require a lengthy cross-examination. That cross-examination could very

quickly devolve into a lcnhrthy battle over not only the nature of the alleged harms, but their

cause and quantitication. As stated above, the reason this information was kept out in the first

place was because of dcticicncics in PI iA 's discovery responses. For Zachry to then have to

cross-examine on this issue when it has not had a chance w conduct discovery ot' any

significance on these issues would certainly be highly prejudicial. And, all of this testimony

would take a lot of time·- we are now in the 8111 week of testimony in this trial as of this writing.

Texas Rule of Evidence I 07 is subject to Rule 403. Walters\'. State, 247 S.W.3d 204.

~

218 (Tex. Crim. App. 2007); Whipple v. State. 28 1 S. WJd 482, 500 (Tex. App.- ·EI Paso 2008.

pet. rcrd).

5

: 0\1118

• • Jt is therefore ORDERED, ADJUDGED and DECREED that PHA's Request that the

Court Reconsider its November 12, 2009 Open-the-Door Ruling Regarding the Port's Actual

Harms is hereby DENIED.

Signed this 11 day of December, 2009.

;//#/j/;/o/'/ Judge Mike Engelhart

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TAB 8

Plaintiff's Fourth Amended Petition and First Amended Answer to PHA's Counterclaim for Attorneys' Fees (CR29:08131-48)

CAUSE N0,-2006·'7?970;.

L I ,. , :_t \, ., ~ . '

+ ..... -

, .:

ZACHRY CONSTRUCTION § ~. fN THE DISTRICT COURT OF CORPORA.TION n!k/a Zachry Industrial, § Inc. ' § ' (

•-.;· § VS, § HARRIS COUNTY, T EX A S § PORT OF HOUSTON § AUTHORITY OF HARRIS § COUNtY, TEXAS § 15lST JUDICIAL DISTRICT

PLAINTIFF'S li'OURTH AMENDED PETITION AND FIRST AMENDED ANSWER TO PHA'S COUNTERCLAIM FOR ATTORNEYS' FEES

TO THE HONORABLE JUDGE OF SAID COURT:

COMES NOW ZACHRY CONSTRUCTION CORPORATION n/k/a Zachry Industrial,

Inc. ("Zachry"), Plaintiff herein, and flies this its Fourth Amended Petition and First Amended

Answer against the PORT OF HOUSTON AUTl-lORITY OP HARIUS COUNTY, TEXAS

("PHA''), and in support thereof would show the Court the following:

I. Discoverv Control Plan

Zachry intends to conduct Level III discovery ln this case pursuant to Texas Rule of

Civil Procedure 190.4. Plaintiff demands a trial by jury, and has tendered the requisite fee to

tbe Clerk of this Court.

H. Parties

1. Plaintiff Zachry is a DelmvaJe corporation, ·with its principal place of business in

San Antonio, Bexar County, Texas.

2. Def'endant PHA is a Texas novigation district established under i\rticle XVI,

Section 59 of the Texas Constitution, with its prim:,ipal place of business in Houston, Harris

County, Texas. Defendant PHA has appeared .in this lawsuit and may be served through its

2

counsel of recordt David H. Brcrwn, Brown & Kornegay LLP, 2777 Allen Parkway, Stlite 977,

Houston, Texas 17019;. Karen T. White, Vinson & Elkins, L.L.P., 1001 Fannin, Suite 2500,

Houston, Texas 77002~· .L Clark Martin, Kelly Hmt & Hallman, l 000 Louisiana, Suite 4700,

Houston, Texas 77002; and Lawrence J. Fossi, Fossi & Jewell LLP. 4203 Yoakum Blvd, Suite

100, Houston, Texas 17006.

III. Venue

3. Venue is proper in this Court as Harris County is the county "in which all or

substantial part of the events ... giving rise to (this] claim occutred.'' TEX. Ctv. PRAC. &REM.

Cor>t~ ANN. § 15.002(a)(l). Venue is also proper as Harris County is the county of PHA's

"principal office in this state.'' TEX. CIV. PRAC. & REM. CODE ANN. § 15,002(a)(3). Finally,

venue is proper in this Court because Harris County is the county in which the parties have

"contracted in writing to perform. an oblfgation,H expressly naming Harris County in that 'Nriting.

Tt::X. C!v, PRAC. & REM. CODE ANN. § 15,035(a).

!V. Jurisdiction

4. Jurisdiction is proper in this Court as the amount in controversy is in excess of the

minimal judsdictional requirements of this Court. Further, this Conrl has personal jurisdictitm

over Defendant as it is a Texas navigation district located in Harris County. Texas.

5. This court has jurisdiction over this suit against PHA because the Texas

legislature has waived sovereign immunity from suit \vhh respect to breach of contract claim!l

against navigation districts such as PHA. TEx. Lac, Gov;T CODE ANN. § 271.151, et seq.

Further, it is well settled that when the State or a political subdivision contracts with private

citizens~ as PHA has done, it waives sovereign immunity from liability. See Tooke v, Ciiy of

3

lvfexlat 197 S.W.3d 32:5,332 (Tex. 2006); Gen. Servs. Comm 'n v, Little~1ex. Insulation Co., Inc.•

39 S. \VJd 591, 594 (Tex. 2001). Tl1is suit involves claims for PHA's breach of a written

contract within the Textis Legislature 1 s express waiver of sovereign immunity. TEX. Loc. Gov'T

CODE ANN. § 271.1 Bayport Phase l A Wharf and Dredging Contract (H\l·/h.arf and Dredge

Contract").1 Based on !he facts alleged below, Zachry seeks to recover damages under §§

27L153(a)(1) and (a)(2) of the Texas Local Government Code. Accordingly, PHA may not

assert sovereign immuni.ty from suit or from liability with respect to the claims asserted herein.

6. On or about June 1, 2004, af\er soliciting proposals and awarding the project to

Zachry, PHA and Zachry executed the \Vharf and Dredge Contract Pursuant to the written

\Vharf and Dredge Contract, Zachry was to construct a J 660...:foot wharf facility in Pasadena,

Tt:xas. Under the original terms of the Wharf and Dr<:dge Contruct, construction \Vas to be

completed by June 1, 2006, ln addition, by February l, 2006, Zachry wa.') to meet an intertm

deadline by which a portion of the wharf PHA had designated {"Milestone A") would be

sufficiently completed supposedly to allow the delivery of certain large ship~teH;hore cranes that

\Vere to be delivered by ship from China.

7. Shortly thereafter, Zachry began construction of the wharf: At the outset~ and as

PHA understood before it awarded Zachry the contract) Zachry's chosen construction

methodology and construction plans involved the construction of a temporary frozen shoring

1 Because the Wharf and Dredge Contract is too volurninous to physically attach to this petition, Zachry hereby expressly incorporates by reference the copy of the Wharf and Dredge Contract filed hy Defendant PHA as .Exh.ibit B to its Plea to the Jurisdiction and to Hs First Special Exceptions.

wall {a "'freeze wall'') al<mg the ch;mnel side of the wharf, The freeze~wall construction

methodology involved building a large berm along the channel side of the wharf, placing pipes

into the berm, circu!at1ng a sub-iteezing brine solution through the pipes, and freezing the.

earthen berm into a frozen soil mass or walL The resulth1g freeze wall would allow Zachry to

excavate the earth between the channel and the fmthcoming \Vharf, under the wharf deck, and

among the wharf's piers in dry conditions without having to resort to more difficult and more

costly mechanical dredging and "'vet" excavation techniqt1es. Based upon this known plan,

Zachry proceeded to build the earthen berm, gather and place the pipes necessary to crea.tc the

freeze wall into the berm, drive support piles, and generally work toward fulfilling its contractual

obligations by executing its construction n1e1hodology.

8. In or before March 2:005, because Pl1A~s contractual design underestimated the

wharf length nec:essaq to meet its own wharf demand, PHA notified Zachry that it needed to

increase the size ofthe \VharfZachry \Vas then building. PHA's original wharf design (for which

PHA had contracted vvith Zachry to build and which Zachry was building at the time) was not

long enough to accommodale the volume and/or type of ship traffic that was expected to call at

Bayport upon the fac-ility's opening. 2 .Due to its o\vn error) PHA requested that Zachry submit a

proposal to construct a longer wharf than the one for \Vhi.ch the parties had originally contracted

in the Wharf and Dredge Contract. Specifically, PHA requested that Zachry provide a proposal

to add an additional 332 feet in length of wharf to the existing design, thereby substantially

increasing the siG:e of the wharf and !.he amount of remaining work. ln addltiont because PBA

2 The determination ofthe wharflength for which the Port c011tractcd in the original Wharf & Dredge Contract was u rnalter solely wiihin PHA's control.

had also underestimated the size of the Chinese crane~delivery ship, PHA also later requested a

substantial increase in the size of Milestone A so that the cranes used to operate the facility could

be docked and unloaded?

9. PHA1 :s immediate need for an additional 332-foot section of wharf required

Zachry to re\vork its construction methodology. In early April 2005: in response to PHNs

solicitation of Zachry for a proposal to perform the additional work PHA needed, Zachry

described to PHA the construction methodology modification that it would need to perfom1 the

work. Specifically, PHA's new design necessitated a critical modification to Zachry's freeze

wall construction methodology,"·,,the addition of a freeze \Vall that would run perpendicular to lhe

original freeze \Vall (the perpendicular \vall being referred to herein as the 11 frozen cutoff wall"),

Tl1e frozen cutoff waH was needed so that Zuch1y could similltuneously accomplish three main

obj~;;ctives; (l) completing Milestone A on time; (2) allowing the Chinese ship carrying the

cranes to dock 1 unload, and depart; and, critically (3) maintaining the remainder of the wharf

(i.e,, the non~Mllestone A portion of the wharf) i.n the dry so that Zachry's construction

methodology could continue to be irnplemented. On April 13, 2005, Zachry provided a written

propostll to perfom1 the a.dditio1ia:l work PHA needed for a certain price, Zachry's price \\'as

expressly conditioned on Zachry's "[u]se of a freeze wall-cutoff wall, encompassing one (1) 'B'

rowpiling," which \Vas exactly \vhat Zachry had previously described to PHA.

10. In August 2005, PHA, informed Zachry that it intended to issue a change order

authorizing the additional work PHA had requested, Ftowcverl PHA~-\vhHe continuing to

3 The designation ofthe length of the Milestone A portion of the \Vharfwas a matter solely Within PHA's controL

6

request that Zachry cr.mstruct the iiddhional wharf section·~simultaneously informed Zachry that

until it issued that change order, Zachry would proceed at its O\Vtl risk . On or about September

12. 2005, at Pl·IA's request. Zachry presented PHA with a detailed design of the frozen cutoff

\'Vall that Zachry planned to use in connection with the c.bange order work as provided under ils

proposal. That design was consistent with Zachry's prior description of the frozen cutoff walt

11. On September 27, 2005, two weeks after Zachry had provided its frozen cmoff

\Vall design, PHA executed Change Order Nurnber 4. ofl1cially agreeing that Zachry was to

pertbrm the additional work under the terms set forth in Zachry's proposal, unless otherwise

specified in the modifications to the April 13 proposal that were made in the change order.

Change Order 4 never rnodified Zachry's April 13 proposal tt'l exclude the use of the frozen

cutoff wall and, thus. the frozen cutoff wall was approved. in Change Order Number 4. Change

Order Number 4 clearly and expressly contemplated the use of the frozen cutoff wall design in

the C(m1pletion of the \Vharf-indecd, it was the explicit basis for the negotiation of pricing and

scheduling under Change Order Number 4. But just two weeks after executing Change Order

Number 4, PHA changed course and precluded Zachry from implementing its proposed,

contracruaJJy approved frozen cutoffwall design. PHA rejected that design. 4

12, PHA's rejection of Zachry~s trozen cuwtf walL which actively interfered with

Zachry's \VOrk, was done in bad ta.ith, arbitrarily, capriciously, and without any legitimate or

reasm1ahle bash~. 5 Moreover; despite recognizing this immediately as a geotechnical problem,

4

Stated another way. PHA impermissibly precluded Zachry from implementing the design.

5

PHA' s bad faith, arbitrary, and capricious conduct, which interfered with Zachri s \Vork, is described in greater detail in Zachry's discovery responses.

PHA did not bother to engage its gedtechnicaJ engineer, GeoTest> until after PHA had rejected

the frozen cutoff walL Moreover, nothing in GeoTest's report would support a rejection of the

frozen cutoff wall. 1n addition, PHA's own Chief Engineer, who had the ultimate responsibility

at PHA for resolving all engineering questions on the project, admitted that PHA did not have

enough infom1ation to judge whether or not the freeze wall violated the standard of care. He also

admitted that no one at PHA had concluded that there would be an adverse impact or that the

cutoff wall design in any way violated the standard of care. Further demonstrating the Port's bad

faith, arbitrary, and capricious conduct regarding the rejection, Zachry's freeze wan experts~

GeoEngineers, provided additional research demonstrating that there was no adverse affec.t to

freezing the :soil around the drilled shafts. Consistent with the freeze \Vall expert's opinions at the

time, PllA's Construction Manager, CH2MHILL, provided the frozen cutoff wall design to its

own in-bouse geoteclmicaJ engineering experts, who returned comments confirming that the

proposed frozen cutoff \Vall design did not pose any issue. PHA's own expert .in this lawsuit has

likewise testified that the frozen cutoff wall was a viable and safe design and that he had no basis

to believe it would have any negative impact on the structure.

13. Another example of the Port's bad faith, arbitrary~ and. capricious conduct is the

fact that PHA expressly charged and designated its Construction Manager, CH2MHILL, to act

on its behalf on this critical cutoff wall issue despite the fact that PHA knew and understood that

CH2MH1LL had a poor record and was HI-equipped to deal with such an issue. Indeed, PHA had

previously admitted that CH2MHLL responded to project and design issues in a ''CYA"' mode

rather than appropriately addressing the issues. This CYA approach was evidenced again when

even after identifying any issues concerning freezing as geotedmical h1 nature, even after

7

i.

receiving CH2MHILL's senior geotechnical engineering experts' opinions stating they did not

see a problem, and even after receiving Zachry's freeze waH expert's follow~up analysis re~

confinning there was not a problem CH2MH1LL·-PHA 's designated agent on this cutoff wall

issue--communicated several problems from a "structural engineering perspective," none of

which were viable concerns, none of which were assessed prior to the Port's rejection> and all of

which were simply designed to divert any potential liability from CH2MHfLL. On October

lO~espite the unanimous approval from freeze wall experts on both. sides and notwithstanding

the fact th<\t PHA had not even hired its own geotechnical engineer to look at this issue (much

less nx:cived the result of any such review), PHA rejected the fq.:cze, walL

14. PHA 's reJection of the frozen cutoff wall constituted a breach of both Change

Order 4 and the General Conditions of the Wharf & Dredge Contract. 6 Notwithstanding PHNs

"'bail and switch" tac:tics·-including PHA 1 s delay in approving Change Order Number 4 and

subsequent improper r~jection of the frozen cutoff wall methodology stated 1n Change Order

Number 4--PHA remarkably continued to insist that Zachry complete the expanded project

vtithin the parameters set forth in Change Order Number 4.

15. Moreover, when it executed Change Order 4, PHI\. had no present intent to>

perform its requirement that Zachry be permitted the right to use the frozen cutoff wall. Texas

law clearly provides that when one enters into an agreement that it has no present intent to

perfonn, this constitutes fraud. Here, on September 27, 2005 PHA executed a contract that

pe1mitted Zachry to use the frozen cutoff waiL PHA induced Zachry to agree this contract at a

6 Alternatively, to the extent PHA contends that it only require<;l Zachry to ''revise and resubmit" its frozen cutoff\vall design, such conduct also constituted a breach of Change Order

9

price and schedule based on a particular frozen cutoff wall design. PHA then rejected the very

desig11 that formed the basis for the contract only days after signing the agreement because it

never intended to allmv Zadrry to use the fi•ozen cutoff wall. To this day PHA denies that it ever

7

intended to approve Zachry's use the frozen cutoffv•tall \Vhen executing Change Order 4.

16, Zachry, unable to implement the agreed-upon frozen cutoff wall construction

method due to PHA 's conduct, found itself short on thne because the work needed to be

completed under the freeze. \vall approach 1 the Port had precluded the use of that approach, and

there was a crane ship that was to arrive frnm China in the near f\rture. Thus, after a review of

the alternative proposed solutions) Zachry ultimately decided it would have to forego the entire

freeze-wall construction method in order to prepare the wharf in a rnanner that would allow the

Chinese crane ships to dock and unload. Zachry therefore was forced in large part to complete.

the wharf using unanticipated "'wet'' excavation techniques. hl doing so, Zachry incurred

substantial additional costs. The completion of interim Milestone A and the entire project was

delayed as a result, as well.

17. Even though the delays were caused by PHA's breach of the Wharf ar1d Dredge

Contract, PHA has withheld and threatens to further withhold liquidated daxnages based on an

unenforceable penalty provision in the contract. First, because the purported liquidated damages

provision attempts to enforce liquidated damages vvhilc simultaneously allowing (and, indeed

calling tor) the recovery of actual damages, it is void as a matter of Texas law. Second, the

liquidated damages provision is unenforceable because PHA suffered no harm. Third, the

Number 4 and the General Conditions of the Contract

i PHA's bad-faith, fraudulent; arbitrary, and capricious conduct tKtively interfered with

10

liquidated damages provision is unenforceable because Zachry's compliance with the contractual

deadlines \Vas precluded by PHA's own errors and misconduct.

18. By its conduct, PITA has breached the Wharf and Dredge Contract in several

respects. Jn particular by precluding Zachry lrom implementing its frozen cutoff wall

constntction methodology and ultimately the entire freeze wall construction methodology, PHA

has breached Change Order 4 and Section 5. l 0 of the Wharf and Dredge Contract. See Change

Order Number 4 to Wharf and Dredge Contract; Wharf and Dredge Contract 11 5.10. PHA has

furthet breached the Wharf and Dredge Contract by \vrongful!y witltholding as "liquidated

damages'' sltms nthenvise due Zachry under the Wl1r1rf & Dredge Coutntct pursuant to an

unenforceable penalty clause and for time overruns that were themselves caused by PHA's

conduct. See Wharf and Dredge Contract, 1j 5.05, ~. 5.06, Addendum No.8 (lll·15) (purporting to

provide PHA the right to recover liquidated damag.es as a dttmage "f1oor," while also purporting

to allow recovery of actual damages if they exceed the liq\tidated~damages amount). PHA is

obligated to pay Zachry the Contract price. PHA is wrongfuLly withholding sums as purported

liquidated dan1ag<Js in breat~h of the Contract. In addition, PH;\ has a!sQ vmmgly withheld

approximately $600~000 from Zachry upder a purpo11ed claim of offset, PHA has no :right to

off.,et these damages under the Contract and is wrongflllly \Vlthholding !his $600,000 which Js

due and owed to Zachry as part of the Contract price in further breach ofthe Contract See Wharf

and Dredge Contrnct at pages 1-i\ ~~i 6.02, 6.05, and 6.!7. Other material breaches for which

Zachry's chosen (and approved) means and methods of executing the work under the contract s "The Port of Houston Authority agrees to pay the Cm!tract.or for the obligations of this Contract the estimated Slim of Sixty-Two Million Four Hundred Eighty~ Five Thousand Seven Hundred Thirty-Three and 00/100 ($62,4&5, 733.00) in accordance with the tenns and conditions

Zachry is not seeldng econ.omic damages are set forth in Zachry's Seventh An1cnded Response

to Interrogatory No. 16.

19, ln addition, PHA has also recently failed to pay sums due and owed to Zachry

under the Contract for the agreed upon Contract price in further breach of the Wharf and Dredge

Contract, induding Zachry's Invoice Nmrtber 39 in the amount of$470,807.94, 1111& is a breach

of pages 1·2 and paragraph 6.02 of the Contract. Zachry seeks recovery of these additional

actual damages.

20. The conset1uences of PHA 's misconduct have caused Zachry significant damage,

PHA 's bad faith conduct, at its core, derives from PHA 's bmTmucratic mentality, incompetence,

and desire to punish Zachry for asserting its legal rights. This is evidencc,d by, in addition to the

matters pleaded above, PH A's racking up of excessive, unreasonable, and urmecessary legal fees

as a means of attempting to mtinufactuni a meritless cmmterc1aim, delay the payment of it.s

obligations under the \Vharf & Dredging Contractj and avoid the payment of its debt by spending

Zachry into submission. PHA 's bad faith pauem ofconduct has persisted up until the present,

including PFIA's rec.ent additional bad faith steps at the end of the project done in order ro

squeeze its contractor. This bad faith conduct includes PHA 's apparent decision to stop pS.)'ing

Zachry's invoices {including .invoice Number 39), PHNs failure to declare that the status of

Zachry's \vork under the 'A'harf & Dredge contract is complete despite (11) that fact that it is

complete, and (b) its contractual obligation to determine the status of the Work, and PHA 1 s

tallurc to permit an assignment of the contract without a legitimate basis to the affiliated Zachry

of the Contract Docurnents. n ld. at 2. The Contract Price agreed to was later tnodified by Change Orders 1 ~ 23, for a total agreed Contract Price of$ 77,982,892.38.

u

entity that completed the project(using the same people that previously performed the work). 9

Vl. Cause of Action: Breach Qf Contract

21, All prior and subsequent paragraphs are incorporated by reference. The Wharf

and Dredge Contract, including vvithout limitation all Change Orders and Addenda to the Wharf

and Dredge Contract, is a legally binding \Witten agreement within the meaning of Texas Local

Government Code Section 271.152. Zachry has performed and continues to perfom1 its

obligations under the Wharf and Dredge Contract, or alternatively, was prevented from

performing certain obligations by PHA's material breach of contract. Zachry has met all

conditions precedent to recovery. 10 As detailed above, the Wharf and Dredge Contract l1as not

9 On December lZ, 2007, Zachry notified PHA that the remaining work on the project (as of January 1, 2008) would be completed by the same personnel) but thatthe personnel \Vould be employed by a sister Zachry affitiate due to a Zachry corporate reorganization. On. January 181 2008, PHA indicated that lt was "prepared to approve such assignment" to Lhe Zachry affiliate that finished the project work as of January 1, 20081 but under certain conditions. Ghien PHA' s lack of consent to the assignment, Zachry did not assign the contract. Instead, it completed the project as it had described to PHA in December 2007. On April 7, 2009. with the conditions PHA previously stated satisfied by the cm11pletion of the \York and/or by additional Zachry assurances provided, Zachry again requested the assignment of the Cm1tract; PHA has not responded and, thus, not pennitted the Contract's assignment. Accordinglyt given PHA's recent bad faith conduct with regard to its lack of consent to assignment and in an abundance of caution, Zachry has entered into a pass~through agreement with its af11liate. Under that agreement, Zachry would be entitled to recover the darnages incurred by and through its anlliate (approximately $8,5.78,712 of the damages alleged by Zachry) because Zachry would be liable to its aniliate for damages sustained by the subcontractor pursuant to the pass~tlu·ough agreement. See Interstate Contracting Corp. v. City of Dallas, 135 S.W. 3d 605, 607 (Tex. 2004). Under that agreement. Zachry is obligated to remit certain recoveries to its affiliate. /d. at 619-20. Under Texas law, PHA has waived its sovereign immunity for such claims. See Hensel Phelps Const. Co. v. Dallas/Forth Worth intern. Airporl Bd., 2005 WL 1489932, * 4 (N.D. Tex. 2005) ("[W]hen a governmental entity~o\.vner \Vaives immunity frorn liability by entering into a contract \'Vith a contractorf it also waives immunity fron11iabi!ity wiih respect to all pasHhrough claims that the contractor may lawfully assert under the contract.").

Jf! Vv'ithout limitation, any applicable notice requirement under the Wharf & Dredge Contract was satis.fied by Zachry's performance or, alternatively, under the doctrines of election

13

bee:n honored by PHA, and damage to Zachry has resulted from PHNs nmteriul breaches of the

Wharf and Dredgt! Contract Therefore. Zachry seeks damages relating to, and stemming from,

PHA's breaches of the Wharf and Dredge Contract Purswmt to Texas Rule of Civil Procedure

47, Zachry states that, based upon its current analysis and subject to the reservation of Zachry's

right to further amend and supplement its damages calculations, the ma;dnmrn amount claimed is

$31,355;41 7, excluding pre~judgment interest, post-:Judgment interest, and cosls. 11

22, As detailed above, Zachry's alleged damages have been disclosed In Section (d)

of its Sixth Amended Rule 194 Disc!.osures. Those damages generally include the following

categories of damages; ( 1) the difterence bet\veen the cost that Zachry would have Incurred had

il been a!Imved to complete the wharf "in the. dry" (i.e.• using the frozen cutoff wall) and the

actual cost Zachry incurred in completing the wharf "in the wet" (i.e., wilhout the frozen cutoff

\.vall), (2} liquidated damages and pena!Ues \Vrongfully \vithhe!d by PielA, in the amounl of

approximate!:>• $2,360,000, (3) damages in the amount of approxhnately $6()0,000 that has been

wrongfully withheld by PHA as a purported ''offset,n and (4) damages for the remainder of the

Contract Price, which the Port has refused to pay. Zachry is also entitled to interest as allowed

by laYv, including pre~ and post.:jud:;,rn1<:mt interest.

23. ln regards to the fitsi category ofdamages listed above, Zachry has designated an

expert witness, Oary W. Draper, to analyze and report on matters pertaining to the amount of

of rern.edies, waiver, estoppel, and ratification. Zachry denies that it breached the \Vharf & Dredge Contract. ln the alternative, to the extent PHA alleges that Zachry committed any material breach of the Wharf & Dredge Contract1 J)HA has deprived itself of the defense of prior material breach because it elected to treat the Wharf & Dredge Contract as continuing and, in additiont insisted that Zachry perfonn the \Vharf & Dredging Contract.

11 Because construction of the \Vharffacility is ongoing Zachry's total damages are

Zachry's economic darnagcs and the method by which those damages have been calculated. The

amount and manner in which these damages have been calculated arc set forth in Mr. Draper's

report This category of Claimed damages by Zachry concerns the damages directly flowing

from O\Vner~caused delays and hindrances resulting from the Port's breach. Alternative!)\ it

includes dtm1ages flc.1wing from the additional work that Zachry \Vas directed to perfom1 by the

Port. This additional work was Zachry having to construct the wharf in the wet rather than in the

dry after the Port rejected the cutoff walL This category of damages is recoverable under both §

271.153(a)(l) and (a)(2) of the Texas Local Govemmem Code.

24. As to the remaining categories of damages, they ktre recoverable under §

271.15J(a)(l) of the Texas Local Government Code as amounts due and ovved to Zachry under

the Contract.

VH, Ccncrtd 1)enhd

25. Pursuant to Hule 92 of the Texas Rules of Civil Procedure, Zachry generally

denies PfLf\.}s_ allegations; including \vithout limitation PHA 's Counterclaim for Attomeys' Fees.

vrn. Defenses

26. All prior and subsequent paragraphs are incorporated by reference.

27. To the extent PHA alleges in its Second Amended Answer and Counterclaim that.

it cm1 avoid liability based on the defenses listed therein, PHA is not entitled to avoid its liability

for breach of contract due to the doctrine of estoppeL

28. To the extent PHA alleges in its Second Amended Answer and Counterclaim that

it can avoid liability based on the defenses listed therein} PHA is not entitled !o avoid its liability

estimated and remain subject 10 change.

l4

for breach of contract due tO the doctrine of ratification.

29, To tl1e extent PHA alleges in its Second Amended Answer and Counterclaim that

it can avoid liability based on the defenses listed therein, PHA is not entitled to avoid its liability

for breaeh of contract due to the doctrine of waiver.

30. To the extent PHA alleges in its Second Amended Answer and Counterclaim that

it can avoid li'ibility based on the defenses listed therein, PHA is not entitled to avoid its liability

tbr breath of contract due m its election ofre.medles.

31. To the extent PHA alleges in its Second Amended Answer and Counterclai.m thm

it can avoid liability based on the defenses listed therein~ PBA is not entitled to avoid its liability

ibr breaeh of contract due to the doctrine oftmclean hands.

32. To the extenl PHA alleges in its Second Amended Answer and Counterclaim that

it can ttVoid liability basod on the d~f<:mses lisled therc.in, PHA is not entitled to avoid its liability

for breach of contract due to the doctrine ofquasi~estoppel.

33. To the extent PHA alleges in its Second Amended Answer and Counterclaim thar

h can avoid liability based on the defenses listed therein} PHA is not entitled to avoid its liability

for breach of contract as a result of PHA's ovln negUgent misrepresentations, fraudulent

inducement, fraudt bad~fahh, ~rbitrary and capricious acts, and active interference with :respect to

Zachry's work.

34. to the extent PHA alleges .in Hs Second Amended Answer and Counterclaim th~tt

it can avoid liability based em lhe defenses listed therein. PHA is not entitled to avoid its liability

for breach of contract because any alleged notice provision in the Contract is inapplicable to

Zachry's claims, and even if such a provision was applicable~ any such provision would be vojd

16

under Section 16.07l(a) of the Civil Practice and Remedies Code. See TEX. CIV. PMC. & REM.

CODE A1'-!'N. § l6.07l(n) (''[a) contract stipulation that requires a claimant to give notice of a

claim for damages as a condition precedent to the right to sue on the contract is not valid unless

the stipulation is reasonabk A stipulation that requires notification within less than 90 days is

void,")

35. Zachry denies that it made any misrepresentation to PHA. 1n the alternative, to

the extent PHA alleges Zachry falsely represented any matter (either aftirmatively or by non-

disclosure), any such delense is barred by PHA's actual kJloWledge offalsily;

36. To the extent PHA alleges in its Second Amended I\nswer and Counterclaim that

it is entitled to recover Its attomeys' fees, recovery is barred by the doctrine of ripeness. 12

37. To the extent PHA alleges in its Second Amended Answer and Counterclaim that

it is entitled to recover its attorneys~ fees, recover)' is burred because the fees PHA seeks to

recover are excessive, not reasonable, and unnecessary.

IX. Praver

38. Zachry, after f·ull trial on the tnerits before a jury of its peers, requests u. final

judgment against Defendant as follows:

a. Darn ages as al1owed by law and to the extent proven at lrial, which exceed the minimum jurisdictional requirements of this Court;

b. Interest as provided by law, including pre- and post~judgment interest;

c. Costs of suit; and

12

Because PHA ~s counterclaim for attorneys' fees is not ripe, Zachry specifically reserves the right to allege offsetting counterclaims for which PHA's sovereign immunity has been waived. See Reata Consrruction Corp. v. Ci(vofDallas~ 197 S.W.3d 371 (Tex.2006).

d. Such other and further relief to which Zachry may be justly entitled.

Respectfully submitted,

~ By:~-~-·--···~·_,__ Robin C, Gibbs Texas Bar No. 07853000 Brandon T. Allen Texas Bar No. 24009353 Sydney G. Ballesteros Texas Bar No, 24036180 Michael R. Absme1er Texas BarNo. 24050195 1100 Louisiana, Suite 5300 Houston, Texas 77002 Telephone: 713/650~8805 Tele.copier: 713/750..0903

ATTORNEYS F'OR l'LAINTlF'F ZACHRY CONSTRUCTfON CORP,

CERTIFICATE OF SERVI<:;'E

1 certify that a copy of the foregoing instrument has been served upon all counsel of record on this: 28th day of Apri12009, in the manner so stated:

Via electronic mall Karen T. White Seth A. Russell Vinson & Elkins, L.L.P. 100 I Fannin, Suite 2500 Houston, Texas 77002

Via electroulc mail David H. Brown Brown & Kornegay LLP 2777 Allen Piirkway, Suite 977 Houston. Texas 770 I9

Vit1 electrtmfc mail J. Clark ivlartin Kelly Hurl & Hallman 1000 Louisiana, Suite 4700 Houston, Texas 77002

Tlia electnmla mail Lawrence J. Fossi Fossi & Je\vell LLP 4203 Yoakum, Suite 100 Hpuston 1 Texas 77006

~~-~~~-­ Brandon T. Allen

TAB 9

Third Amended Original Answer and Counterclaim for Attorneys' Fees (CR45:13008-35)

CAUSE NO, 2006-72970

ZACHRY CONSTRUCTION !N THE DISTRICT COURT OF § CORPORATION, § § § § v. § HARRIS COUNTY, T EX A S § , THE PORT OF HOUSTON AtJTHORITY § § Defendant.

§ !51ST JUDICIAL DISTRICT

THIRD AMENDED ORIGINAL ANSWER ANO COUNTERCLAIMFORATTOltNEYS' FEES

TO THE HONORAB'LE JlJDGE OF SAID COURT:

COrv18S NOW The Port of HbustO!l Authority of Harris County. Texas (the "Port

Authority' 1 or "Port''); Defendant, and, subject to its Plea to lhe Jurisdiction, files: it<: Third

Amended Otl&inal Answer and Counterclaim for Attorneys• Fees, and respect.fully shows the

Court as follows:

IMMUNITY

l. 111e Port Authority is a political subdivision of the .State ofTexus and i::~ therefore

prote.cfed by the sovet'eign or governmental imn1unity doctrine. The Pmt Authority is immune

ti·om suit und from liability for all causes of action and damages except as wovided by

Subchapter I r>fChaptcr 271 ofthe Texas Local Oovcmmenl Code.

GENJf,Rt'\L DENIAL

2. Pursuant to Rule 92 of the Texas R11lcs of Civil Procedure, the P<lrt Authority

gcneraliy denies the allegations of Plaintiff Zachry Gonstructit)ll Corporation (HZachryll).

EXHIBIT

STATEMENT OF THE FACTS

3, The Port Authority is charged with mvning, building, and operating tho publically

owm.:d portions of the Port of Houston. Among the lund owned and operated by the Port

Authority is the vast Bayport Tenninal Complex ("Bayport~'). tn 1998, the Port Authority began

developing a master plan for Bayport that includes some 7)000 linear feet of wharf, modern shlp·

to-shon:1 oranes for mpid loading and unloading of cargo~ 380 acres of container yards) and a

cruise terminal. These facilities are being developed over timej with the design and timing of

each phm;e tlctom1ined by market demand, availability of funds 1 and environn:tt.mtfll permitting

limitations.

4. By 2003, the Port Authority was ready to begin building what is latown as Phase

lA ofBayport, which lndudtxll,660 linear feet ofwhar( dredging~ an adjoining container ;'atd,

and rclatt!d facilities. 'I'he engineeriog design called for the wharf to be supported by more than

I ,100 concrete piers drilled to various depths (some to u depth of 120' below sealevel).

5. The Port Authority solicited competitiv<l set~ted proposals for the contract

Zachry, while not the low proposer, Sllbmitted a proposal wilh scvcnd attractive features. Thes<:.~

im::luded 1 most prominently, Zuchrts proposal to build the wharf by using unconventional

means by first drilling the piers and installing the wharf deck on <ky la.nd and then excavating

under the wharf deck and among the piers "in the dry, 1'

6. Znclwy proposed to create the dry environment for ils work beneath the wlmrf

dook by usc of a freeze walL Tho freeze wall would be created by installing a network of

hundreds of''itooze pipes" in an earthen berm or cofferdmn along tho wharrs entire channclsidc

lenglh. Zachry would then circulate sub~ freezing brine through the freeze pipes, ceeat1ng a wall

of frozen soil strong enough to stand without other structural support ami strong enough to hold back the bay water while Zachry excavated beneath the wharf deck and around the wharf.

Zachry did not propose to use a freeze wall on the land side of the excavation; it planned to use

conventional dewatering techniques to deal \Yith groundwater infiltration from !he land side.

Once the excavation was complete; Zachry would remove the freeze pipes, thaw and breach the

wall to admit the bay waters 1 and clred ge away the soil.

7. Zaclu·y's freeze wall proposal offered the Port Authority a creative way in which

to meet federal standards regarding emissions of nitrogen oxides. ln seeking the award of the

contrm:;t1 Zachry made other representations that were attractive to the Port Authority. Zachry

pledged to involve Rnmll businesll enteq)dses in the project and to work with the Port Authority

in a cooperative spirit. lt tonted itselfas a large and expetienced construction company that had

successfully undertaken other Jlovel and cotnplex projects, and represetited that would undertillte

appropriate due diligence to detr.:11:nine how to capably und compe~ently prosecute the Phase lA

work. It promised that it would place in cl1t-~rge of the Phase lA project the experlencud senior

managt!r who had taken the lead in presenting Zachry's proposal to the J>()).'t Authority. Zachry

assured tho Port Authority thatthe Port could rely on Zachry as a team player~ and that Zachry

would work with the Port in a struightl'orward manner and not engage in any "claims game."

8. Regrettably, all of these representations, on which the Port Authority relied,

proved to be untruE~; At the time~ however, persuaded by these representations, the Port

Authority entered into negotiations with Zachry which culminated in the Phase !A Wharf and

Dredging Contract dated Jm1e J, 2004 (the ".(;Qptract"). Early In !he Project and in response to

the Port Authority's concerns regarding freez;ing the soil, Zachry a1>surcd the Port that the

fh:ezing would remain far enough awuy from lhe piers that it \Vould not compromise the \vharf's

structural integrity. The Port Aulhodty's concern was well justified; the drllled piers' abillty to

4

bear weight comes mostly from "skin friction" at the itttorface of the soil and pier down the

length of tim pier~ Freezing tl1e earth near the piers could decrease their load-bearing capacity.

In addition, the expanded volume of the soil from fn:>eidng could even move, bend, or bret~k the

piers. Zachry, which had a contractual duty to protect the cmnpletcd portions of the wharf

s!ruch1rc while it wus prosecuting its work, promised thut it would maintain at least nine feet

btSlWt1Cn the frozen soil amlthl;l:;urface of the piers.

\1. The Contract Included two crucial deadlines n.nd stipuli:lled !hat time was of the

essem~e regarding perforrnance of the Work, The iin~t was Pobmary l, 2006 (u date defined in

tho Contract as thn "Milestone A" date)~ by which Zachry agreed to have one portion of the

wharf fully completed, Tile Port Authority needed that portion of U1e wharf completed by the

Milestone A dnte so that four huge cran<'.S, which were being fabdcated in China and wert} to

ardve ln Houston by ship, could be de!lvered and assembled, and rben the cnme operators tndned

on the crnncs, in time tbr the completion of the remainder of the wlmrf. The se(.:ond was the

''I1inal Conlplction" date of June I, 2006. by which the wharf fnoilities nnd dredging work were

to be completely finished,

10. At the outset, Zachry fell behind schedule. Among other things, il was late in

mobilizing its on-site work force, submitting its concrcle mix formu!atlon 1 and preparing its

ccmcrele butch plant Th~;t ::;tart of both ctmcrclc work and the freeze wall inslallt~tion were

significantly delayed. Further, there was a series of blunders involving the freeze walL Most or the blunders have their origin in the character and decisions of Zachry's construction manager,

Harold (Andy) Anderson.

IL Anderson wa~ not even a Zachry employee when the Contract was signed.

Znt;hry hired him several weeks later, nftcr a short and hasty search. Although the freeze wall wus a cen!tn'!)lece of Zachry~s constmction phm, Anderson did not want to use it Rather than

immediately lnoving forwnrd with the freeze waH, he spem months fi:ultlessly searching for an

nltcmative1 putting the freeze wan behind schedule. He even delayed entering into a subcontract

with the freeze wall subcontractor whom Zachry had chosen "" RKK SoilFreeze Technologies

("RKK"). lnde<:xl 1 Za<~hry .fitially signed the RKK subcontract) and thus freed RKK lo submit a

fi·cezc wall design, only after the date on which Znchty had l>larmed to hove the freeze wall

completely installed,

12. Anderson compounded his mistakes and delays by compromising Zachry's ability

to properly pcrfonn the freeze wall .installation. F'or example, RKK had spent a substantial

amo1n'tt of time working with Fanner Foundation, Zachry's drilling Stlboontractor which was to

install both the J)iers and the freeze pipes, to assurttthat Fanner Foundation was acquainted witl1

the ptt.>eise teehniqua't and tolerunces necessary in plndne, and installing freeze pipes. After all

this prepumtion work1 Anderson gave the tusk of installing tho freeze pipe to another, cheaper

sub<mntractor. 'l11c replacement subcontractor's wurk was abysmal; it seldom drilled the pipe in

the location or at the angles specit1ed, and as a consequence the freeze wall design had to be

amended to include additional freeze plpt::s to fill in nU!iler011S gar)s. ln another ill,.;arlvised cost

saving effort, Anderson bought used and dirty freeze pipe inslead of new pipe. Ultimately, after

much lime was wasted, approximately 70% of the used pipe was determined to be defective, and

hnd to be replaced,

13, In Febmary of 2005 1 havlng concluded that Zachry was behind schedule and in

danger <>f being unable to satisfy the Mile.'itone A obligation (but having failed to so advise the

Port Authority), Anderson began planning to use a "cut·off \VIlli" running perpendicular from the

frliez() wall to the land, Under his plan, Zachry would attempt to divid\fi the pmjeGt in two,. If would first excavate beneath the wharf on one side of the cut-off walt, and n:tter so excavating

would breach the main freeze wall on i'hat side so the ship carrying the cranes COtt!d dock and

unload. Tl1cn 1 Zachry would excavate on the: other side of the cut-off wall to complete the

remnimler ofit!l work.

14. Several weeks after Zachry determined that it likely would need a cut~offwall, the

Port Authority advised Zachry that the Pm·t was considering extending the w1mrf's length by 332

foot Zachry appreciated that the extension would not m.erely be u v.alunble piece of work~ but

also would offer an opportunfty tu hlivc the Port Authority pay for whatever cut~off wall Zachr)'

ultimately would build. Zacl)ry urged the Port Authority not to J)Ut the wharf extension oul Lor

proposals by other conlracwrs, but instead to add the worl<' lo Zaclu·y's Contract. Although it

knJ.>'<V better, Zachry assured the Port that it was on schedule under the 0xisting Contract and

could build the whttrf extension and still moot. tho Milestone A date.

15. On April 5, 2005; Anderson briotly explained a concept !br a cut'-off wall nt n

meeting with the Port Authority's consultants. He promised that Zachry would soon furnish the

Port Authority with a proposed design forth<:: cut¥ofr \Vall. Aware of the Port's concem about

lrcozing ncar piers, he promised that freezing was not an issue,

16. Atlcr several months of ncgoti ations; dtlring which Zachry continued to provide

the Port Authority with inaccurate schedules and to give other assurances thai it remained on

schedule1 the parties agreed on the terms of t11e \vhmf exteusion work ln Change Order 4 to the

Contract. The change order, which added approximately SB million to the Contmct price and

extended tim Milestone A date by 15 days~ was approved by the Port Commission in lme July of

2005. The l'ort At1thority prepared the ~.:hange ordcw paperwotk .and delivered it to Zachry on Augt\st I0. By then, Zachry already had authorized its sub(~ontractors to begin working on the

6

r~ 11 ...:::.. ....:4.

extension. Zachry held the cbange order for several weeks ;,vhile it tried to negotiate added

benefits under the change order. Finally,; on August 29, 2005; Zachry delivered the signed

change order to the Port A:Uihority.

11. lAter, on or about September 12, 2005, Zachry t1nally submitted a draft design for

the cut~off waiL Like the odginul freeze wall design, the draft cut-off wnU design was prepared

by RKK's engineering firm~ GeoEngineers. The late delivery dutu of tliis da~igtt was another

instance of inexcusable delay by Zachry. Despite having known since at least Febt·uury that it

design wm: tmdcrway, Zachry waited uutil All gust to autho.rize the de.sig11 work.

18. Consistent with Zachry's earlier slate.tntmts that it intended to provide the Pori

expre."sly invited such review and comment. GeoEngim:crs noted that its desigo \Vas l1Jcrely a

draft and would be made final only atier GeoBi1gineers incorporated comments fh:nn the Port

Authority's eommltanis. Zachry's transmittal message underlined this point, stating thar the draft

was intt:Jnded to give the Port Authority "the ability to se~ what wm be happening and gather questions they might have fbr the engineer."

the cuL~on' wall wmild include freezing in and around the piers to a much greater extent and at

gre<ttter dtsp!hs lhan Zachry had disclosed in discussions in A11dl< Contrary to Zachry's

representations during the negotiation of Change Order 4, freezing was lndee4 an issue in the

submitted design; the design showed freciing at greater depths, and aJ'fecling many more piers,

than Zachry had represented. The Pmt Authority had no <Jbjection either to the use of a cut-off

wall or to the use offh:eze wall tcc:hnology in the Cl.ltmoffwttlL Howt::ver1 it was concemed about the prox irnity of the. freezing to the drilled piers and the resultant risk to the structure. ThUS1 the

Port Authmity responded tn the draft design on October 11, 2005 by noting its concern over the

propnsed freezing near the piers and by instructing Zachry to. ' 1revise and resubmit" the draft

design by presenting either an alten1ative cutoff wall dm;ign or 1u1 "alternative means of

mitig{tting risk to tho :stnwtural integrity of the wharf.''

zo. TJ1e Port Authority delivered its r~sponse at an October 11, 2005 meeting at' the

Buyport site. After the Pmt Authority explained its conre!TJ) Andet•son promised that Zachry

would work with the Port Authority to come up with acceptable desiE:,'TI nmdificaJions. The Port

Autl:J.otity believed Zachry, GenEnginecrs already had told one of the Port Authority's

consultants that OeoEnginecrs could easily modily his d<:Sign, or crcnte an alternative design, to

address the Poresoonccms.

21. Within a few weeks, GcoBnginccrs did prepare a ntodlflr~d design whlch, while

continuing to use tl'eeze technology, avoided any freezing in rmd among the drilled piers. When

Geol!:nglnecrs showed the modified design to the Port Authority's consultant, he smted that if

Zachry !lubmittod the modified deslgrJ, he would npprove it without delay~

22. By that point, however, Zachry's mas:·iivo scheduling problems ovetwhe1med all

otl1er considerations, including the out-off wall. In earl}t Octohet· of 2005, aficr submission of

the draft cutoff wall design andprior to the Port Authority's response to the dralt cutoff wall

design, Zachry .revealed to the Port Authority that it \\tould be 35 days late in meeting the

Milestone A date~ the very date to which Zachry hod just agreed in Change Order 4. The Port

Authority, surprised by this revelation, demanded thal Zachry present a schedule recovery plan

in accordance wiih the Contract.

23. 17oe the first time, Zachry finally began to attempt to detail the ft·eeze wall and

cutoff wall activities in its schedules. It quickly discovered that 35 days late was a gross

underestimate; in eady November Zachry prepmed detailed schedules (which it concealed from

the Port Authority) reflecting that Milestone A would not be achieved until Deccn1ber 30, 2006.

As Zachry further refined its schedules, matters only became worse. By mid~Novcmber,

Zachry's scheduk1s showed that with a freeze wall, it would not achieve Milestone A until May

of 2007. Moreover, those schedules predicted it could achieve Milestone A and Final

Completion much sooner by abandoning the freeze waiL

24. When Anderson saw the refined sclmdules, which showed Zachry desperately

behind schedule, he detennined that the only way Zachry touid hope to have !he wharf prepared

to land the cranes would be to abandon the freeze wall, dig as deeply as possible without a freeze

wall, and then work in the wet. (Even at that, Zachry would not he able to perform all tbe

dredging and excavation required by the Contract as part of the Milestone A work, and \vould

have to defer such work until ailer the ctancs were unloaded.) On November l, 2005; Anderson

gave orders to cancel all orders for freeze wall rnatedals and to slowly rernove Zachry personnel

.itom the ii·eeze walt area,

25. Amazingly; Anderson did not advise the Port Authority or RKK that he had given

these inslmctiot1S. instead, he confected lies to Zachryts management to e>:J)luin why he was abandoning H fi·eeze wall in vvhich Zachry ttlre.ady had invested some $9 million. He reported to

hJs m1pervisors that chitters .needed to cool the brine that would cin~uLa1e through the freeze pipes

had been "commandeered" hy FEMA in consequence ofHunicum~s Rita and Katrina. He then

attempted to {jnlist RKK in this fraud, mging RKK to report a clliller shmtage so Anderson could

Jbrward the false report to the Port Authority. Anderson threatened RKK with financial harm if attempt to Zachry*s management. Zachry's management, however, never bothered to investi.gate

this shocking report. To the contrary, Zachry's management continued to rely on Anderson for

information about wbat was happening at the l3aypolt job site.

26, Appreciating that his lie about commandeered chillers would not find support,

Anderson modified tl1e lie by reporting to Zachry management tbat some chillers were available,

but not enough to operate the freeze wall adequate1y1 and in consequence the fi·eezing would take

much longer thnn planned.

27. Anderson also invented n second lie tn Zachry mtmagement: that sheet pile

required ibr the alternative cut-off wall de;Jign was unavailable, and would remain unavailable

for months. Anderson lold this He desnite knowing that the sheet. pile was available for

i:n.unedinte delivery from !ievernl different suppliers; RKK had oonfinned this fuct to Anderson.

zs. In making the decision to abandon the freeze wall, Zachry had not prepared any

cost or Cllf:,rincerlng analysis to determine whether its revised conslruclion plan, which Zachry

has somethncs referred lo as "Ptan H,jj wus sensible or, indeed, even feasible. h had not

evaluated whether il1l estimated excavation rales or o!htlf production rat(}s were realistic. It had

not determined how it would excavate bem7nth the wharf deck. It had not dctem1ined how

deeply it could snfely excavate with an unfi·ozen berm. H hod not addressed the problems

created by u,roundwater infiltration. It had$ in short, nq reliable way of evaluating the time

required fbr, tlm costs entailed by, or tl1e risks and benefils of Plan B, and no rcHable way of

c.ompadng the time, costs, risks, and benetits of Plana with those of the freeze walL

29. Representatives of Zachry nml the Port Authority had n series of meetings and

phone conversations in October, Novernber, nm1 December of 2005 to discuss the scheduling

!Q

issues. Zut1hry told the Port that it had detem1ined to abandon the main freeze wan because it

was out of time to implement the freeze wall and stilt meet the contractually required completion

dates for Milestone A and Final Completion. Zachry told the Port Authority that more water was

flowing fhnn tl1e land side than Zachry had anticipated and that it could not freeze the soil

quieldy enough, Zachry suid its schedules show~d thttt abandoning the freeze Viall and

proceeding instead \\1th Plan 13 ·-working in the dry behind a n\>tv11~ozen berm to a certfti n depth

and lh~m working ln the wet thet'eailcr •w would result iu the earliest practicable achievement of

the Miles.tnne A and Final Completion dates.

30. At no point during any of the many rneetings or convenmtions .in late 2005 did

Z.n:chty ever sta.tc or even suggest, as it much later would clairn ln this lawsuit~ that its decision to

abandon tho freeze Wti!l \VM connected with any supposed 1'rejection" of the draft cut:..offwall

design, as Zachry now ctairns in this lawsuit .Zachry made no sucl1 rmggestion because the

tnodificalions thnt the Pott Authority requested to the submittal of the draft design played no role

in Znchry;s decision to abandon the frcczo Wtill.

:l l. Bad Zachry asserted in any of the coiwersations in late :wos, a.'! it later would in

this lawsuit, that it was abandoning the ti:ee%e wall as a result of the Port Authority•s i'evise and

resubmit rc._<;ponse to the dmfl cut~off waH design submittal, that abandonment .of the freeze wall

\vas going to del11y Zachry's completkm of the project and increase Zachry's cost tb complefe1

and thut the Port was somehow responsible for the resulliog delay and increased costs to Zachry,

then there is no doubt that the entire tenol' of those cmwersnHonN would have chtmgcd~ and that

the Ptwt Authority promptly would have, at a minimum. instructed Zachry to delete the '''harf'

exlensitm from the scope of ils work under the Contract

32. Zachry's planning, estimating1 and execution have proved to be no better since it

abandoned the fi·eeze waH tl1au before it did so. Through no fault of the Port Authority! Zacluy

failed to execute the work in accordance with any of the numerous schedules it prepared for

complc!lng the project using the Plan B construction method. Zacht'y did not dec!u:ro final

completion of its work until January of2009.

33. Unbeknownst to the Port Authority, the "Zachry" entity with \Yhich the Port

Authority contractt1d apparently Cklased perfom1ing the Work on the Contract. Instead. Zacluy

ch1mged its nmne and Zachry's parent company created a new comp!l.nY to assume Zachry's "

name - lhc name Zachry Constmction Corporation. In lnte 2007 r Zachry asked the Pmt

Authority for its oonsent to an assignment of the Contract The Port Authority responded that it

would consent to the assignment upon satisfttction by Z11chry of several reasonable conditions.

Zachry di.d nm agree to or satisfy the conditions. In fact, Zachry ignmed the Por! Authority's

response. Instead of respondit1g to the Port Authority or satisfying the conditions, on

infbrmntkm and belief., on January 1, 2008 and without knowledge of the Port Authority, the nmv

company apparently began pertbrming Zac1ny's CJbligutions ~mdcr tl1e Contract. Zachry assigned

its obligations under the Contract to the new company in breach o:f Section 3.13, apparently

ceased to employ OJHiite supervision in breacll of Section 5J 61 and apparently ceased self-

peribrming the Work and engaged a subc~)ntractor not disclosed to the Port Authority in breach

oJ Scclion 5.11 of the General Conditions.

34. Apparently, the new company (which did uot have u contract wit11 the Port

i.f"". Authority but had assumed the name of Znchry) with Zachry's knowledge and at Zachry's

instruction submitted invoices for Work and signed releases to induce the Port Authority to make

payment. Zachry thereafter represented to the Port Authority that the claims in this titigntion w<:r(: Zachry's claims and that all cost.'l which it sought as damages were incurred by Zachry,

Even Zachry's damages documentation- disclosed to the Port Authority only after order of the

Cow·t -· states that all costs were incurred by Zachry. They were not 35. OnAprl127, 2009, Zachry entered Into agrecntents with the new company.-. buck

dnting the effective dates of the agreements to Jmtuuxy l} 2008 - in which the new company

agreed to perform the Work f(H' no payment t1·om Zachry1 other than wlmt the Port Authority

paid to Zuchry. Tn tho event the payments from the Port Authority wen:: leas thun the amounts

incurred by the new com puny, the tR~w company agreed that Zachry had no liability to th~; new

oompatly. Zachry abo gnmtctl the new company (which l!ud no contract with the Port Amhorl!y) the right to pursue und control this liiigation, all in the namo of Zaobry.

3(:). ]'he Port Authority pleads the 1b!lowing defenses to Zachry's pleaded causes of

actions and to Zachry's purported defenses to dtlfttnseN enrlier pled by the Port Authority:

37. Zachry is not entitled to recovery against the Port Authority for brem..:b of the

Con!rnct bcctwsr> the Pori Authority acted in acwrdmme with the Contract provisions, including,

bul not limited to the 1ight to withhold pn}•mentlt (Secliorm 6.05, 6. '! 1, S.OS, and 5.06 of the

Oermral Cnnclit.ianR) 1 the right of the C~1lcf Engineer to demand a recovery plan (Section 5.09 of

the General Conditions), the right. to review nnd respond to submittals (Section 5.22 of the

Ocneral Conditions)) ihe right to require schedules, reports and other additional information

(Section 5.25 of the General Conditions), and ln the event it has an instruction contnuy to the

Contract, the right to chtmge tlte Con!rnct (Sections SAl and 5A2 ofthc General Conditions).

38. Zachry's allegations do not constitute a breach of any of the provisions of the

Conll'acr by the Port Authority; 11u~ Port Authority's request that Zachry mitigate the risks to the

Port Authority drilled shafts by revising and resubmitting the September 9, 2005 draft cutoffwaU

design wa<> not a breach of Section 5.1 0 of the Contract or of Change Order 4; the Port

Authority's withholding of liquidated damages was not a breach of the Contract; and the Port

Authority's payment ofZachry'lllnvoices~ \Vhich Zachry characterizes as "falling to pay Zachry

the money that it was pmiodicnlly entitled to be p!lid under the Contmc! as it has come due," was

nota breach of the Contract.

39. Zachry is not entitled to recover u·om the Port Authority based on any alleged

breach by the Porl Authority ofthe Contract because Zachry has not complied with all conditions

prccudcnl It! its alleged right lo recover for such alleged breaches, :such as Zachry's failure to

provide notice of such tlahns within the time, in the fonn, or to the person required by the

Cnntract; including but not limited to the notice required by Sections 5.08, 5.18, and 5.42 of the

C3onera.l Conditions. Zachry did not timely provide notice as required by the Contract with

respect t'<l any ufiis claims, mnnely, Zachry's claims: [aJ that the Pnrt Authority's request that

Zachry mitigate the risks to the Port Authority drilled shafts by n.:wising and res:ubtnittirig the

Scptcm1H::r 9, 2005 draft cutoff wull dcsig11 constituted a breach of Section 5J 0 of the General

Conditions of the Contract; [bl that the Port Allthority's request that Zachry mitigate the risks to

the Port Authority drilled shaHs by revising and r~ubmifling !he September 91 2005 draft cutoff

\Vtdl design conMtituted u breach of Change Order 4; [c) that the Port Autllority's withholding of

liquidated dan1ages constituted a breach of Section 5.05 of the Contractor Md A the

Specification and Proposal) Page 111-8 (Addenda No. 8) of the Contract; [d] tl1at the Port

Authority's instruction in accordance with Section 5.09 of the General Conditions of the

G<mtrnut explain to the Port Authority ho\V Zachry intended to complete the Project within the

Contract Time or other ext:rcise of the Port Authority's right under the Contract constituted a breach; or [e) that the Port Authority breached tho Contracl1 Section 6.02. 6.05 or 6.17 of the

Oenural Conditions, or some unidentified provislon of tho Contract In its payment of or il:diure to

pay Zachry1s invoices, in whole or in part or within any particular time, including any breach

\Vhich Zachry characterizes ns ''failing to puy Zachry the money that it was periodically entitled

to be paid under the Contract as it has come due." Each of the requirements in the Contract thut

Zachry timely and properly pr~~ent its claims for more money or more tirne is both (1) a

substantive contractual condition precedent to Zachry's rigl1t to recover rnoney or additional time

with tcspect to the Contract, and (2) jurisdictional under the Texas Constitution, s1atutes, and

cmnmon law of Texnfi applkab!e to the Port AilthoritytR inimunity from suit and/or immtmlty

ih:11n Jlabilily.

40. Moreover1 m the extent any of provisions of the Comtact are or have been held

void or nnenfbrceahlo, Section 3.12 of the Ocncral Conditions of the Contract, which the Port

Authority hereby affirmatively pleads in it!> entirely~ requires that any such provMon be severoo

fh.Jm the Contract, the balance of (he Contract enfbn::ed, and the stricken provision refom1ed and

replaced with a valid pnwlsion. Spcciflca!ly, Section 3,12 provides that the }<parties further

agree to retorm [the] Contnict to replace any stricken poti1oni clause or provision with a valid

portion, clause or provision that comes as close as possible to the intent of' the stricken poriion

clatise or provision." Thereforei the Port Authotity pleads that Ihe Ct)urt enforce the severance

und reformation ltmns of the Contrnct with respect to a{lY provision of the Conlrnct that is held to

he vnid ()r unenforceable, including without limitatloJt the second parugraph of Scctioil 5.42 and

Section 5.05 in oombinuti.cm with Section s.06 1;1f thti General Conditions of tl1e Contract1 such

that they are enibrceable and ref1ect the intent orthcparties.

!5

41. Zachry's allegations that the Port Authority hns impropedy withheld payment and

fulled to pny Zachry does not constitute breach of Contmct us alleged by Zachry. I1H~ Port

Authority paid Zachry in accordance with the terms of the Contract and applicable law.

Moreover, Zachry ugreed to a Iv!ilestone A date and a Final Completion date. Zuchry agreed to

liquidated damages Jn the event it foiled to meet these dates, Zachry failed to meet the Mllestone

A date and the Final Completion date. In addition, Z,achry failed to properly perform Work and

the Port Autlmdty had to puy another contractor to correct or mitigate harm caused by Ztwl1ry's

defective Work. The Port A.uthotity's withholding of monies from payments to Zachry is

ffU1'POJied hy enforceable provisions of the Contract} including the right to withhold payments

(Section 6.05 of the General Conditions), the right of offset (Section 6.11 of the General

Conditions)) the right ro liquidated damages (Section 5.05 of the Gem,ral Conditions). the right

to actual damages in lieu ofliquidated damages (Section 5.06 ofthc General Conditions)t and the

Specificntion and l~oposal {setting forth the concept of reduction of the contract price for late

performtmce). The liquidated damages withheld were u reasonable forecast ofjust compensation

because the Co11tract pwvided for liquidated damages in lieu of actual damages and because the

Port Authodty sustained actual dmnages in an mnounl that \Vas not disproportionate to the

liquidated damages.

41. Zndu:y is not entitled to recover any dftt'l!agci'J from lhe Port Authority as a result

of the Pori Authorltls alleged breach of the Contract beet!use Zat~llt'y is barred by the express,

cnforucublc provisions of the Contract th>m re<::overing for lhe losses and damages that Zachry

alleges. Sornc ofthcsc risk-allocating contractual provisions that bar ZaeJwy,s recovery include,

but are not limited to:

a, Assumption of the riRk by Zachry for any lack of completeness ht the Wharf and

Dredging Contnwt Documents, including the Drawings and the Specifications,

an,d the risk of those documents not being sutnckmtly detailed and

comprehensive, Contract, Oeneml Contiitions § 2.06. Zachry failed to timely

raise v.ny cm1cems with the Contract Documents and cannot now oomptain about

their comlition.

b. A no-dnmages-for~delay or hindrant~e provision. Con!ract1 General Conditions §

5.{}7, Zaclwy cannot recover damages assuciated with delt\y in the Project or

hindrance or its perfommnce. This provision precludes Zachry's asserted

"exceptions}'

o. No cnt!tlciw;mt to an Increase in the Conttact Price except undet limited

circumstances. Contract, General Conditions §§ SA 1, 5.42, $.43 1 5.49 and 5.50.

Zuchry did not thnely and properly assert a clulrn under any of those ptovisions.

d. A specific and limited force majeure provision. Contract, General Conditions

§ US. No cntillemcnt to an extension of time except when the: circumstance

conslHutcs art event of Force Majeure and ls on the critical path. Contract,

Gcncrn.l Condilions § 5.08, Zachry has not established an event of.Force Majeut·e

entitling It to uny additional tlmc.

!.;, Tho det!nition of ConctuTentDeluy. Contract~ General Conditions § 1,08. No

entitlcrn:ent to lU1 extension of t!me if tbere Is also an event of Concumm.t Delay.

Contract} General Comliliom; § 5.08(b)(6), Zuchry caused Concurrent Delays

1llrLlter preventing it trout being entitled to tm extension of time.

f Waiver of claims for an extension of time by failure to timely and properly file a

request for time extension. Contract, General Conditions § 5.08. Zachry £.13led to

timely or properly seek any extensions oftirne.

g. Waiver of claims for changed conditions or contract interpretations that are not

timely and properly asserted, Contract~ General Conditions § 5.42. Zachry failed

to timely or properly assert any claim for changed conditions or contract

interpretations constituting a change to the Contract.

The Port Authority has not modified or waived uny of these provisions 1md is not estopped from

relying .on any ofU1ese provisions. Contract, G{meml Conditions§§ 3.09 and5.52.

42. Zachry is not entitled to recover from the Port Authority based on any alleged

breach by the Port Authority of the Contract because Zachry foiled to meet the Standard of Care

required in Section 1,37 of the Oe:neral Conditi:ons of the Wharf and Dredging Contact, which

provides that Zachry shall use 11• • • , [its] best .skill and attention, ln a good and workmanlike

manner and in the best and most expeditious and economical manner consistent with the interests

of tl1e Port Authority, shall exercise the degree of care, sklll and diligence ln the perfom:mnce of

the Work in accordance with an.d consistent with industry standards fm· similar circumstancos,

shall utilize its best skill, efforts and judgment in :furthering the interests of Pmt Authority; and

shall Lltmish eff1denl business administration nnd supervision."

43. Zachry is nol entitled to recover any damage..~ from the .Port Authority as a result

of the Port Authority's alleged breach of the Contract because Zachry tailed to comply with its

affirmative contractual obligation under the Contract to timely and accurately provide

contractually required information to the t>o1t Authmity, including but not limited to, the

l&

infornmtionrequircd by Sections 1.37, 5.03 and 5.04 of the General Conditions, the progress of

the work, und the Schedules for compl\lting the Work,

44. Zachry fs not entitled to recover from the Port Authority based on any alleged

breach by the Port Authority of the Contract because Zachry is barred by the "first breach"

doctrine because Zachry first materially brcuchcd the Contract, including but not lhnited to

Sections 5.03, 5.04, 5.09, 5.10 (including 1.37), 5.14 and 5.22 ofthe General Conditions of the

Conl'mct.

45, The Pmi Authority denic..(J that any oral statement purporting to change or modify

the Contract Documonts is binding on eithe;· the Port Authority or Zachry. The Pori. Authority

denies that any written statement purporting to change or modify the Co.ntrnct Documents; other

Uum om; from the Chief Engineer that oompHcs with the express J)rovisions fur change in the

Contract DucumentS1 is binding on either the Port Authority or Zachry.

46, The PurL Authority denies that Change Ordet' 4 includes as a term that a cutt>ff

wall mw1t be used by Znchry to pctforrn its Work, and denies that Change Ordm· 4 ittclndes rmy

torrn tlmt some pa11icular design of a cutoff waH must he mmd by Zachry to portbrm its Work.

Zachry is not entitled to recover fi·om the Port Authority bused on uny alleged breach by the Port

Authori!y of the Contract, as amended by Change Oi'det 4, as a result of troy 1nodifieation to

Zachry's September 9, 200.5 draft cutoff wall design requested by the Port Authority.

47. Zachry is not entitled to recovc~· from the Port Autlwdty based nn any alleged breach by the Port Authority of !he Contract b<.~<.~ause Zachry did not pelform lts obligations

under the Contract :in a timely fashion. Zachry d:ld not complete the applicable portions of the

Work by Milestone A or the FiriHI Complulion dates required by the Contract Zachry did not

timely and properly request extensions oftime of such dates.

J9

48. Zachry is m:H entitled to recover an)' damages fi·om the Port Au01ority as a re$ult

of tlle Port Authority's alleged breach of the Contract because Zachry failed to properly mitigate

its alLeged damages.

49, Zachry is not entitled to recover any damages from the Port Authority as a result

of the Port Authority's alleged breach. of the Cmltrnctbecuuse Zachry owed th<t Porl Authority a

duty of full disc!osm·e under the law, which duty offuH disclosure was breu.ched by Zachry.

50. Zachry is not entitled to recover an)' damages from the Port Authorily as a result

of lbo Port Autbodtts alleged i;Jn:ach of the Contract because Zachry comrni!ted fhtud and f-Taud

in the inducement In connection with entering into the Contract, and at various times during the

performance ofits work under the Contt·act1 including during negotiation of Change Order 4, and

during its meetings and cotYVimmtions with the l1ort Authority about scheduling in late 2005,

Zachry made representations and promises \Vl1lch were mntet'ial* were false1 and which Zachry

knew were false and/(W knew it had no inlentlon Qf fulfilling, or made the representations rQcldctlsly without knowledge of their truth. Such fhlse representations and promises were !'!Htde

Cor tltc purpose of inducing ti)e Port Aulhorily to take ttctions (:mch as entering into Change

Order 4) or refrain fh:nn taking action~ (uuch ns refraining frorn either terminating the Contract or

deleting the wharf extension from the scope ofZaclu~y's work under th~ Contract). In taking or

rethJining ll·om tuking such actions, !he Port Authority reJied on such fillS\.1· representations and

promises; causing tho Port Authority injury. Suc.h behavior by Zachry constitutes Jh1ud, and isH

complete defense and bar to Zachry's claims tn this lawsuit.

.51. Zachry is not cntitred to recover any damages fi·om the Port Authority as n result

oi' lhc Port Authority's alleged breach of the Contract because Zachry committed fraud by non~

disdooure. In cmmection with entering into lhc Contract, unrl at various times during the n

performan,ce of its work undc;r the Contract, including during negotiation of Change Order 4, Mcl

during its meetings and conversations with the Port Au!hol'ity about scheduling in late 2005,

Zachry; in violation of both the Contract and of a common law duty to disclose, concealed from

or failed to disclose material information lo the J>ort Authodly, Zachry had a duty to disclose the

fucts lo tlm Port Authority; but \Vas delih~rately ~iilenr when 1t had n duty to speak. Zachry

concealed such material infonnation, knmving that the Port Authority was ignorant of the facts

and did not have unequal opportunlty to discover the facts, in order tn induce the Port Autlmrity

to take a<.:tions (such as entering i.nto Change Order 4) or rcftain from taking actions (:mch as

desisting Jrum either terminating the Contnwt or deleting the wharf extension from the scope of

Zachry's work umlcr the Contract). In taking or refraining ii·om taking such actions, the Port

Authority was !ndtJced by such concealment. The Pori Authority relied on Zachry's non~

dim::losurei and was injured as a result of acting without kn.owleuge of the tlnd!sc1oscd facts.

Such behavim· by Zachry constit~ltcs fraud by .non·disclosm:e, and is a cotttpletc defense ru1d bnr

to Zrmhry's claims in thts lawstlit.

52. Alternatively~ Zachry is not entitled to recov0r O:om the Port A\Jtliority based on

any alltlgcd hreach by the Port Authortty of the Contmet bccnuse of Zachry's negligent

misrepresentations.

53. Zachry is not entitled to tecover fHJm the Port Authority based on any ~I!egcd

breach by !he Fort Anthorily of the Contract boomme Change Order 4 is an accord and

satisf~mtlon of any "claims'> that Zachry had at that time that Change Order 4 was executed, AU

prior Hclain1s'1 of Zachry were merged i.nto 1 sub:mx:m.:d by, and extinguished through Change

Order4.

2!

54. Zachry is not entitled to recover from the Port Authority based on any alleged

bretteh by !he Poti Authorily of the Contract because the damages sought b)' Zachry arc

consequential damagewand thus barred by stat\tte and by principles of governmental irnmunily.

55. Zachry is not entitled lo recover fi•om the Port Authority based on tmy alleged

brench by the Port Authority of the Contract because Zachry ratified the P01t A uthodty 1s alleged

adio11s und inactions.

56. Zachry ls nol entitled to recover from the PQrt Authority ba.<;ed on any ailegcd

hreuch by the Pmt Authority of the Conlrac! because Zachry waived the complaints it makes in

this action and any right that il may have had to lodge a clain1 for the Port Authority's alleged

breach of' the Contract

57. Zachry is not entitled to recover from the Port Authority based on any alleged

breach by the Port Authority ofthe Contractbecause Zachry is equitably estopped from lodging

any such claim for alleged }:treach of Contract.

58. Zachry is not entilled to recover irom the Port Aut110rity 1)ased on any alleged

breach by the Port Authority of the Contract because Zachry is barred by its own inequitable

conduct and acts of eoercion that threaten the larger public interest.

59. Zachry is not entitled to recQver from the Pott Authority based 0~1 nny allege.d

breach by the Port Authority of the Contwct because Zachry i!l btm·ed by the doctrines of

promissory t~»toppel and quasi-estoppel based on Zachry's aotion~ and inactit>ns.

N N 60. Znchry is not tmtitled to. recover from the Port Authority based nn nny alleged

breach hy the Port Authority of the Contract because Zuchry's claims arc bun-cd by the defense

of release.

61. Zachry is not entitled to rec.over from the Port Authority bused on any alleged

breach by the Pmt Authority ofthe Contract because Zachry's claims are barred by the defense

ofpnyment Tho account describing and itemizing the payments made by the Port Authority on

the Conlract (the breach of which forms the basis of Zachry's clnirn) is attached to this pleading,

lnbelcd Exhibit A, ~md incorporated herein by reference,

62. Zachry ls not entitled to recover from the Porr Au1horily based on any alleged

breach by the Port Authority of the Contract because ZHchry's ulnims arc barred by the defens-e

63, Zachry is not entitled to recover frorn. the Pori Authority based on any alleged

broach by the, Port Authority of the Contract bconusc Zachry acted as a volunteer, voluntarily

changing its position, not due to tiny forw or ather condnct by the Port Authority~

64, Zachry is not entitled to recover fl'Om the Pmt Authority based on any afleged

breach by tho Port Authority ofthe Contract becrmse Zn:chrts cl.aims lll'e burred by the defenso ·

of unclean hands.

65, Zachry is not entitled to rec<Wtlr fmm the J.>ort Authority based on any alleged

breach by the .Port Authorily of the Contract because Zachry's claims lite barred by Zachry's

own bad fnith conduct, arbitrary and capl'icious acts and omlssitms, and condm;:( lacking auy

reasonable basis,

66. Zachry is not entitled to r~Jcovc:r from the Port Authority because any dnmages of

l.achry were cuus~d or C{mtributed to by its own breach of duty; fault, or misconduct, M the

breach ofduty~ fault, or misconductof others tb1· whom Zachry il:l rcspunsible iu law.

67. Zachry is not entitled t(l recover fi:mn the Pmi Aulllority by virtue nf Zachry's

treatment ofthe Contrm.:l as continuing and, in addition, Insisting that the l'ort Authority perform

24

the Contract, precluding any cf.aim by Zachry of any defense of prim· material breach, under the

doctrine of election of remedies.

68. Zachry is not entitled to recover frnm the Port Authority by reason of Zachry's

conduct that nctivcly interfered with (a) the wurk of Zrwhrts subcontraGlors, and (b) the Pod

Anlhority's rights under U1e Contract, including Zachry's obligation to provide accurate and

timely inforrnation, as mquireu by the Contract.

69, The Port Authority denies thnt it made any misrepresentations to Zachry. ln tbe

allernutivc, to the extent that Zachry alleges the Pori Authority falsely represe11ted any mutter

(either affirmatively or by non~disclosurc), any such defense is barred by Zachry's actual

knowledge of faJslty.

70, Zachry is not entitled to recover from the Port Authority on the basis of any

allt.1ged ~'pu~>S-through" claim. The aUeged injured party (a Zachry "aftl!iate" now known as

Zachry Construction Corporation) did not exist at the time of the atleged breach by the Port"

Authority ami was not injured by any action or inaction ofthe Port Authority, Further, there is

no claim the nlleged h\iured party is entitled to assert against Zachry or for whfch Zachry Is

llnbll;) thut forms the bnsis of the "posJHhrough" claint

71. Zacbry is not entitled to recover from the Port Authority on the basis of any

alleged "pas:-Hhrong:h'' claim becrxusc Zachry assigned its obligations under the Contract to the

"uffiliutc'1 in violation of Sections 3.13, Zachry and/or Zachry's parent company tm.tl...<Jferred

control of Zachry ln violation of 3. I 5, Zacl1ry ceased to employ on·site supervh;km in violotion

of 5.1 6, and Zachry ceased self-perfunning any of !he Work and engaged a subconlraclor not

disclosed to the Poti Authority in violation of Section 5.11 of the General Conditions.

72. Alternatively, the Port Authority's immunity from suit and liability precludes

Zachry from recovering damages for or on behalf of nny other pm1y or entity, h1.cluding without

13. Alternatively, the Zachry "affiliate" on behalf of whom 2',.;\chry asserts a "pass~

through" claim acted as a volunteer, voluntarily changing its positiont not due to any force or

other conduct by the Port Authorit>'· 74. The Port Aulhorily respectfully rese1·ves the right to file un mnJ.?nded answer in

t11is Cause in the manner authorized by the Texas Rules of Civil Procedure,

75, COMES NOW the Port Authority and rcspectfillly Hsscrts this counterclaim fbr

attorneys1 fees pursuant to Section 3J 0 of the General Conditions of the Contract, for which a

filing fee has been tendered.

JURY DElVIAND

76. T!w Polt Au!ltority hereby demands a trial by jury,

PRAYER

WHEREFORE; PREMISES CONSfDHRED, The Port of Houston Authority of Harris

County; Texas, Defendant, prnys that tho Courl enter judgment that Plaintiff take nothing, that

Plaintiff's claims be dismissed with prejudice; and that Defendant be granted judgment for its

attorneys' fees and costs of court further, to the extent that the Court domrrnines that any

provision of the Contrnct is urmnforccuble as written, Defendant prays that the Court reform such

provision in accordance with the Contraol, and that Defendant be graute,d all other and fUJ1hcr

relief: nt law or in equity1 to which Defendant may show itself enti lled.

Respectfully submitted,

A~--~~~~ David H. Brown Of Counsel: 8rown & Kornegay. LLP J. Clark Martin Texas Bar No. 03109200 Texas Bar No. 13090000 2777 Allen Parkway, Suite 977 Kelly Hmt & Hallman Houston, Texas 77019 lOOO Louisiana1 Suite 4700 713.528.3703 phone Houston, Texas 77002 713.528.3701 fax Tel: 713.654.4600 Email: dbrown@bkJlp.com Fl1x: 713.521.5925 Email: clark.martin@khh.cnm Co .. Cm:Jnse1:

Karen 1'. \\'bite Texns Bar No. 20274500 Set11 A. Russell Tex1ts BarNo. 24027943 VINSON &ELKINS L.L.P. 2500 First City Tower 1001 Fannin St. Houston, Tex~u; 77002 Phone: 713.7$8.2388 Fax: 713.615.5902 Email; kwhite@velmv.com

Lawrence J. Fossi Texas BarNo. 07280650 FOSS I & JEWELL LLP 4203 Yoakum Blvd N 100 Houston 1 Tt!xas 71006 Ph<lne: (713) 529-4000 Fax: 713-529-4094 Jfossi@fossijewell.com

A'ITORNEYS FOR DEFENDANT THE PORT OF HOUSTON AUTHORITY

VEIUFICATJON

STATE OF TEXAS

COUNTY OF HARRIS

Before me ihe undersigaed Notary Public, tYersona11y appeared Erik A, Eriksson, who, being fi.rst duly sworn, did state that he i$ authorized to .sign Verification on behalf ()f the Port Authority? that he has read the foregoing Third Amended Original Answer and Counterclaim for Attomeys' Fees, and in accordnnce with Texas Rule of Civil Procedure 93 hereby verifies the truth of the matters set forth in Paragraph' ) 42 1 tmd 46 above,

Erik A, Eriksson, General Counsel, The Port of Houston AuU}odty ofHarris County1 Texas

Sworn to and subscribed before me this.~ day of June, 2009.

'd-J\Ct..-J ~~-,,, . ~- Notary Public in ana for the State of Texas

·;X; 01 .....0 r- ("'j '.J ,;f! d: •r. r- !'~ "¢ (",...4. "¢ t: "'E .:;;,

z ::l 27 ,.... :;) $::: a '.) Q a 13 c.: t:: 0""'

CERTIFICATE Ol" SERVICE ;::z r cl J hereby ccrlify that on this .~~·day of June, 2009~ a true and correct copy of the Port Authority's above Third Amended Origirml Answer and Cm.mtcrclnim fhr Allomeys' Fees was served on !he following counsel for Zachry Construction Corporation in accordance with the Texas Rules of Civil Procedure.

Brandon Allen, Esq. Oibbs & Brmts, Ll.P l i 00 Louisiana, Suite 5300 Houston1 TX 77003

~·,;,1 ·~-·---.

_/1;:·.1

Seth A. Russell

~ N '-- 0 ::<> N ":""J C:f) 'ti$ c.

"'' t- t- ~·

''"' ~ t: t.> ~ §

28

- z ~ § <..> c Ci -::;1 ":) L":: ·~ v :!.

TAB 10

Excerpts from The Port of Houston Authority's Second Amended Response to Plaintiff's Request for Disclosure (CR46:13036-77)

Flied 09 Septemb&r 30 P4:05 Loren JackSon ~ District Olerk Harris county E0101J015531241 By! Wanda Chambers

ZACHRY CONSTRUCTION § In tllo Disltict Cot1rt of CORPORATION, § § Phdxlliff § § v. § Harris County1 Texas § § TBEPORTOFHOUSTON AUTHORITY § § Dofendt1nt § 151st Judicial District

'rlill PORT OF ROUS'fON AUTfl.OlU'fY'S SECOND AMENDED RESPONS'E'l'O PLAINTIFF'S lU~QUltST l.i'OR DISCLOSURE

To: Zachry Construction Corporation By rmd through lts attorney of record Robin C. Gibbs} Esq. Gibbs & f:ln1ns1 LL:P 1100 Louisiana, Strite 5300 Houston1 Texas 17002

C01v1J:SS NOW, THE PORT OF HOUSTON AUTHORITY '(the uPort Aut1tority")1

Defendant in the above styled tmd m1n1hered cnusct and pursount to Tnx. R. CIV. P. 194 files this

its Second A1mmded Response to Platntlff'r.• Requestfor Disclosure,

{a) The correct nam.es of the parties to the lawsuit,

The correct name of Defendant Is Port ofHot1ston. Authotity ofii.m:ds CNtnty, Te~t.as,

Dcfoodaut undersluuds that tlvJ correct na.rne of Plulnt:iff is now Znclu-y Industrial, Tnc.•

fnn.nerly ktlow.t1 as Zachry* Conslrtmtion. Cm-pomtion.. 1t appears that the entity formerly 1mown

as Zacht-y ConRtmction. Corporation engaged in tnu1sactions such that it no longer perfrmned the

Work undet the Phase 1A Whruf und Dredging Conlrnct, witront the prior knowledge of

EXHIBIT POOT Attl'fi(HU'l'f'l) SftOONi> AMKNDEU R~l'ONSl~ ro ZAClUW1S RltQt.IJU;l'f l!Oll. J>tSCJ:o~Ul\t~

Defendant and ill breach, of the Contract. Defendant has tlot had an opportunity to conduct

discovery on this issue} and has only limited knowledge of the ti'ausactiorls. Defendant has no

contract with the new entity that apparently is now lmoW'li as Zachry Conslrnctio:n Corporation.

No entity has a right to mak--e claim against Defendan~ or to prosecute tbis lawsuit against

Defendant, other !:han the emtlty with wh!eh Defendant originally contracted.

None, except that Defendant maintains that tho entity against which it originally

counterclaimed remains a party to this lawsuit and ia responsible for Defendant's attorneys' fees.

(c) The legal theories and, in general, tho factual basis ofthe_Defemlaot's claims or defenses.

!~..Qnse:

The Port Authority's legat lheorios am pleaded in it~ 1'htrd Armuuletl Original Answer, as

follows:

The Pmi Authority is a political subdivision of the State of' Texas and in tllerefore

protected by tho sovereign or goverruuentul immunity doctrine. 'the Port Authority is immune

from suil tmd from llabUity for all em1sos of notion and damages except as provided by

Subchap(et I ofClmptet· 271 ofthe Texas Local Government Code.

Zachry is not entitled ttl recovery against the Port Authority for bxooch of the Contract

because the Port Authority acted in accordance with tlio Contract provisions, inchtdingt lmt not

limited to tho right to withhold payments (Sections 6.05t 6.17) 5.05, aud 5.06 of the General

Conditions), the right of the Chief Engineer to dm:mmd n re0overy plan (Section 5.09 of the

General Conditions)1 tho right tn review und respond to submittals (Section 5.22 of the General

Conditions)) the dght to rcquiro schedules, reports and other additional information (Section 5.25

l'OR'l' AlJTllORIT\'tS SUCONii AMENDE\) Rl{.'ll'ONSWfO UctiRY'$R'I1:Qtll!lS'1' l<Ult.l>ISCLO$VRI!

ot' the General Conditions), and in tlte event it ha.~ an instruction contrary to the Contract, t11~)

right to j}hangc the Cont:ra<:t (Sections 5.41 amd 5.42 of the General Conditions).

Zachry's allegations do not constitute ll breach of any of tho provisions of the Contract by

the Port Authority, The Port Authority's re,quost that Zachry mitigate the risks to the Port

Aui:11ority drilled slu1fts by revising and re&'Ubmitling the Septembet 9~ 2005 dtaft cutoff wall

desigi:I was riot n bxeach of Section 5,10 c>f tho Contractor ofthe Contract o1· of Chnnge Order 4;

the Port AutlmrityJs withholding Dlliquidated damages was not a breach of the Contract; and tht~

Zacl1ry llle U'JOney that it was periodically entitled to be paid undcnhe Contract as itlms eome

duet was not a hxeach of tho Contract.

Zachry is not entitled to recu\ier iro.m tho Port Authorityhased ori any u11eged breach by

the Port Authority of the Contract bt'l<muae Zachry has not complied with all conditions y:roocdont

to its alleged right to .recover for such alleged btea<ihes, such as Zachry's ihllure to provide

notice of such claims within the time) in the f'orm, or to the person required by the Contract,

iricl'nding but not limited to tho notice requit·cd by Sool'!ons 5.081 5, 18~ and 5.42 o~ the General

Conditions. Zachry did :not timely provide t10tice as required by the Contract with rer::pect to any

of its olaimst munely, Zachry's clahns: (a] that the Port Anthoricy>s request that Zachry mitigate

the risks to tne Port Authority drilled shafts by 1·evising and .resubmitting the Soptomber 91 2005

dr<1ft cutoff waU design constituted a breach of Section 5.10 of the Gen~&nd Conditions {)t the

Contract; [b) that tho Port Authority's request tbat Zoohry mitigate the I'isks to the Poxt j

!'I \r)

Authority ddtlcd slmfls by revising and rcsub:nrltting the September 9, 2005 d:ndl cutoff \vall t"" r~

f.., ·"1' ""1'

design constituted a bteach of Chang(') Order 4; [c) thut the Port Authority's \v:ithholding of t ,_C E ,. liquidated damages <.~n.stitutcd a breach of the Conf.tact; [d] that the Port Antlunity1s instructicm i POR'i' AUTii0Rl'I'Y1S !{ltCONl'l 1\!\'lli:NDF:o iHtSl'ONSE '1'0 u.cmw's REQUESTFon mscr,osunu;

in uccordance ·with Section 5.0.9 of the General Conditions of the Contruot explain to the Port

Authority how Zachry intended to complete the Project within tho Contract Tbne or other

exercise of the Port Authority's right under tl1e Contract constituted a broach; or [e) that the Pmt . .

Authority breached the Contract, Section 6.02~ 6.05 or 6.17 of the General Conditions, or some

unidentified provision of the Contract in its payment of or failure to pay Zachry's invoices; in

whole or in part or within any particulm· thnet including any breach which Zachry chm·acterizes

as "failing oo pay Zauhcy the money that it was J)Ctiodically entitled to be paid under the Contract

us it hac; come due," Each of the :requir~rnents in the Contract that Zachry timely a:ud properly

11rescnt lts claims f<1r more money Dr more time is both (l) a substantive contractual condition

proocdcnt to Zaclny' s right to recover money or additional time with respect to the Contract, 1md

(2) judsdictional under the Texas Constltutio11; stall.Jtcs1 and cornm<m law of Texas applicable to

the Port Authority's inm1uruly from suit and/odtnmun1ty ft~om JialxiJity,

Moroover, to tho Qidcnt any \lf ;provisions of the Contract ate or havl;} l:m<m held void or

uncnforuenhle, Scetkm 3.12 of the Gcncrnl Condition~\ of the Contract, 'Which the Port Authority

lwreby afflnnativoly plcada in its \:lrttirety, requires that any such provision be severed from !he

Contract, tho balru1ce of tlte Contract enfot•ced1 and tho stricken provision reformed and :replaced

with a valid provision. Specifically, Section 3.12 provides that the *'parties further agre;e to

roform [tbeJ Contract to replace any stricken portion. clause or provision with a valid portion,

clause or provision that comes as close as possible to the intent of the stricken portion chms0 or

provision," Therefor<; the l'ort A1tthority pleads that tl1e Court enforce the severance and

rcfonnatio11 terms of the Contract with respect to any provision of the Conh·uot that is held to he

void or unenforceable~ includi11g without limltntion the second paragraph of Section 5.42 and

i'OltTAtr!'li<JRl'l'Y'S Sl!.COt-ID AMENDt10 R.RSt'ONSlt TO ZACHRY'S fU!QUEb'T l<'Oit DlSCI.DSUiU!.

Section 5,05 in combination with Section 5.06 of the General Conditions oft.ho Cont:rac4 such

that they are enforceable and rctlect the intent of the parties.

Z<tohry;s allegations frmt the Port Authority bas improperly wiiliheld pa:yrncut and failed

to pay Zachry docs not constitute breach of Contract :as alleged by Zachry. The Port Authority

paid Zachry in aooordnnoe with the tenus of the Contract and applicable law, Moteover> Zachry

agreed to a Milestone A date and a Final Completion date. Zachry agt'ood to liquidat<."..d damages

in the event it fhilcd to meet these dates~ Zachry failed to meet the 1\1itestone A date and tho

F1nal Completion date. Jn additio~ Zachry failed to properly petfo:tm Work and the Pott

Autlu;rity bud to J>tty unrJther contractor to correct ot mitigate harm caused by Zachrfs defective

Work. The Pm·t Authodty>s withholding of moniGs fron1 :payments to Zachry is :-.upported by

t:nforceah1e provisimm of the Contract> including tl1e dght to withhold payments (Sooti.on 6.05 of

the General Conditious), the right of offSet (Section 6.17 of the General Conditions), tbe right to

liquldutoo dm11agcs (Section 5.05 oflhe General Conditions); the right to actual damages in lieu

of liquidated damages (Section 5.06 of the General Conditions), and tho Specification mu:l

Ptoposal (seliing ftnih the ctmcept of reduction of the contract pdce for late performance). The

liquidated damages witbhekl we~t~e a reasmmble forecast of just con1pensation because !:he

Contract provided for liqttidatcd druuages in 1ieu of actual damages und because the Port

Authority sustained actttal damages ill .an amount that was not disproportioxl!lte to the 1iq11k1ated •n II'\ '- 0 II'\ ::.. ~(). Zachry is uol entitled to recover any damages fi:om the Port Authority as a l'Cst:Ut of the t:l.

j !"'I It') Port At1U10rity's alleged breach of the Contract because Zachry is 1.-nu:red by the oxprcss, r- 1> ""' f.'!") entbrceablc provisions of the Contract n·om recovering for the losses and damages that Zachry -;:!'

st:::1 :;:: ·~

'" :; §'"' POI\T AtrfJlo!U'I'Y'S Bli:CONI) MmNOEIJ Rll1Sl'ONSI£ 'fO iJ 0 ZACHRY'S 1mQUES1' FOR rHSCLO!ltJRE 0 1l u:: 'B '\) (.)

alleges, Sonm of these rlsk.-allocatitlg contractual provisions that bar Zachry's recovery include,

but are not limited to:

~ Asswnption' of the risk by Zachry for any lack of oompleteness in the Wharf and

Dredging Cont111ct Documents, including the Drawings and the Speci'fications~ and

!he rlsk of those documents not being sufficiently detailed and oomp:rehausive.

Cnnh·act1 Genetal Crmditions § ~t06. Znoluy failed to timely mise nny com:ems with

the Contract Documents and cannot now complain about their condition.

§ 5.07. Zacbzy cannot reoover damages associated with do1ay in the Project or

hindrru1e~~ of its perfo:rn.umoo. This provision precludes Zachry's assorted

~ No entitlement to an increase in tho Contract Prico exoopt undm· llmite<l ci:rc\'l!UStauces, Contract, General Conditi.ona §§ 5.4L 5.42} 5,43, 5.49 and 5.50,

Zachry did not timely and prop~rly assert a clailn under any of tlJOsc provisions.

o A specific and limited force majeure proviskm. Contract, General Conditions§ 1.18.

No entitlement. t.o au extension of limo except wlur:n the circumstance eonstitutes an

event of Force Majeure and is 011 the cd!ical path. Contmct, General Conditions

§ 5.08. Zachry has not established nn event of Force Majeure entitling it to any

additiotmi time,

& Tho rloflnition of Concurrent Delay. Contract> General Conditions § 1.08. No

entitlement to an extension of tlmo if theYe is also an event of Concurrent Delay. Contract, General Conditions§ 5.08(b)(6), 7-nchry caused Concurrent Delays further

preventing it fro~n being entitled to au extension of time.

PORT AU'J'UOJUTY' SSJWOND AMENDED lUt:Sl'ONSE TO 74\.CIIRY1S REQIIRST ~tor~ Ll!SCLOSUltll;

I} Waiver of claims for an extension of time by failure to thtl<>ly nnd properly file It

reqm;st fbr tune extension, Crmtract1 General Conditions § 5.08, Zaohry failed to

timely or J!topedy seek any extensions of tim~.

~ Waiver of claims fbr changed oonditiuns or contract interpretations that ru·e not timely

rmd properly assorted. Contract) General Condittons § 5.42. Zachry failed to timely

ot properly assert at1y claim fhr changed conditions or conu·act interpretations

constituting n change to the Contract. The Port Authority has not modified or waived

any of theso provisions and is uo1 estopped from reiying on any of these provisiooo..

Zachry is not entitled to recover from the Port Authority based on any al.leged breach by

the Port Authority ofthe Contract because Zachry failed to meet the Standard of Cnre reqt1ired in

Section 1.37 of the Genctal Conditions of~1e Contact~ wh~c11 provides that Znc1rry shall 11se ..... c

[its} be.st skill and attention, in a good ttml workrmmlike manner and in the be.st and most

expeditious and eoonon:dcal manner consi&'tent with the interests o~ th~ Port Au.thorlty, shall

exercise the degree of care~ sknl and diligence in the performance t>f the Work it;~ n.coordance

with and consistent with industry standttrds for sim.ilar citcurustauce~<J} shal1 utilize its best skill,

efforts and judgment in furthering the ii.tterests of Port Authority) ru1d shall ti.tmish officicnt

Zachry is not t1ntitled to recover any damages n:om the Port Authority a& a result of the

l>ort Autho:rit:ts alleged breach of the Contract bootmse Zachry failed to oori1JJ1y with. its

affirmative conh'I\CL\tfll obligation under tl1e Contract to tlm<Jly and acctu:utely provide

oontractually required infoxmation to the .Port Authorityt inCluding bnt not limited to} tho

PORT AUTI!ORl'lYtg sm::UNtl AlVHtNDEO RESf'ONS!t TO ;r.,\(itftt.Y'S ltV.Q'llF-iS'nl'(llt I))SCl~OSUW> PAG~7 information required by Sections 1.31, 5.03 and 5.04 ·of the General Conditiom>t 1he progress of

the work, and tho Schedules for completing tho Work.

Zachry is not e~titled to recover fi:om the Port Authority bused on any n11eged breaoh by

the J>ort Authority of the Contract because Zachry is barred by the "fu:st breach'' doctrine

because Zachry first materiallybr(,lac1ted the Cortlract~ including but not limited to Sections 5.03,

5.04,5,09 1 5.10 (including 1,37), .5.14 and 5.22 of the G·cncrat Conditions of the Contract.

Tht;J Port Authority denies that any nrul statement purporting to change or modifY the

Contract Documents is binding on either the Port Authority or Zrtchry. The Port Authority

denies that any written stntement pilflJOrting to clumge or modify the Contract Dom1mc;-.nts$ otnel'

than one from the Chief Engineer that complies ·with the expre{ls provisions for change in the

Contmct Docun\ents) is binding on either the Port Authority or Zachry.

'l'he Port Authority dooics thai Change Orde~ 4 iuclttdes as a term that a cutoff wuli must

be used lJy Zachry to perfMm its Work, and deuies that Chnngc Order 4 includes any term that

sou1c purticulru: design of a cutoff wall must be used by Zachry to perform i~ Work. Zachry is

not etltillcd to recover from the Port Autllodty based on tuly alleged breach by U1t~l'ort Authority

of tlH> Contract, as nmcmled by Change Order 4) us u result of any modification to Zachry's

September 9, 2005 draft cutoffwall design requested by the Port Authority.

l.achxy is .11ol entitled to recover fh>m the Pmt Authoril;,Y based on any alleged breach by

th~; Port Authority of tho Contmct l>ecause Zachry did not perform its obligations under the

Contract in a timely fashion. Zachry did not complete the applicable l)Ortions of the Work by

..-. N I

Milestone A or the Pina1 Complelion dates rcq\1ired by the Contrnct. Zachry did not tlmely and

properly request extensions oftlme of such clato1:.

l'ORT AU'J'!IOIU1'Y 1S SECOND AM.ENTJED llliSl'ONSB1'0 ZACHIW 1S REQUF})'Tll'OR ))]SCf,OSUR'll- PAGlt8

Zachry is not entitl<~d to recover any damages from the Port Authority a.~ a result of the

Port Authorlty's alleged breach of the Contract because Zachry failed to properly mitigate its

Zachry is not .z:ntrtled to recover any damages fipru the Port Authority as a result of the

llott Authority's aJleged breach of the Contract because Z~chry owed the Port Authodty a duty

of full disclosure under the law) which duty tlf fttll disclosure was breached by Zachey,

Zuohcy is not entitled to recover rmy damages from the Po.ct Authority t\S a n~sult of tho

Port Authority's a!legt~ breach of the Contract. bccuuac Z-achry oomnuttcd fraud and fraud in tile

i:nduccmont. In cnrmection with entering into the Contract, and ut various time.~ during tho

:pe:rfmmunoo of ita work \lllder the O::JlJlraot, including dtiring negotiation of Change Order 4l and

during its :mootmgs and cmiver{;utions with the Port Authority abo11t schedll1iug in late 2005,

Zachry made reprosenhtii(JnS <Jnd promises which were material, were fulse, and whlch Ztk:hry

knew wct'Q false mullor knew it had no intention. of iblfilliug, or made the representations

recklessly withoullmuwlcdge oftheir truth. Suob false ropresen.taiions and promises we:rc made

ibr the purpose of' inducing the Port Authority to take actions (such as entering into Change

Order 4) or refl'ain trorn taking actions (s\JCh M reth!lning ft'ot11 either termit1ating the Contract or

deletntg the wbarf extension il-om the scope of Zachryts work under the Contract). In taking or

refraining fmm Inking such actions, the l}mt Authority relied on such false representations and

promises, CflllSilig the llo.rt Authorityinjuey, Such behaviorby Zachry constitute-S ft•aud, tmd is a

complete defense tmd bar to Ztwhry's .<.:l!dms in thls ict'NSUit.

Zachry is not enUtlcd to recover any danlf;\gOO from the Port Authority as n result of the

Port Authority's alleged 'breach of the Contract because Zachry oommltted fraud by non~

disclosure. in OOM<1ction with ontedng into the Contract, and (tt vadrms LiniXI~ during tho

POR'r Af.JTflOillTY' S fiffi{XlND AM~NLIED RESI!ONSE TO ZACI.m\'•s fiEQUEH~r ll'Olt PlSCT,OSURl< per.tbrmance of its work under the Contract~ including during no&otiaiion of Cl1tmge Order 4, atld

during its meetings and conversations with the Port Authority about scheduling in late 2005,

Zachry, in vi.olatio11 of both the Contract and of a common law duty to discJose; concealed from

or failed to disclose material information to the Port Authority. Zachry had a duly to disclose the

facts to th.c Port Authcuit}\ but was \iellberately silent when it had a duty to speak. Zachry

concealed such material information, knowing Umt the Port Authority was ignorant of the facts

nnd. did not lmvc an equal opportunity to discover the facts) in otder to induce the Port Authority

to tnke actions (such as entering into Cbange Order 4) or refrain trotn tt1king actions (m1ch as

desisting frum either te:nninating tile Contract or deleting the wharf e>;.tension from the acope of

Zachry's work under the Contract). ln taking o:r reti:ainiug :fi:om taking such actions, the Pmt

Atlthorily wa.<J induced by such com1ealment. Th¢ Port Auth<>dty relied on Zaclu:y's non~

disclosure, nnd was h\iured as a result of a.ct!ng without knowledge of the undisclosed faots.

Such behavior by Zachry c011stitntcs fraud by non~disclmmr~, nnd is a complete defense and b~t

to Zachry's claims in this lawsuit

Alttimativc:lyr Zachry is not entitled to recover Jhnn the Port Authority bused on uuy

alleged breach by tl:l.e Port Authority of the Contract he¢auso of Zacbrts negligent

rnisreprescntntions.

Zachry is not entitled to rcm:rvcr ti·om the Port Authority based on any ul h)ged hreacl1 hy

the Port A1.1thorlty of the Contract because Change Order 4 is an accord and satisfaction of any

"claims)! that Zacl1ry lutd at that tiine that Change Order 4 was executed. AU prior "claimsll of j

N ..,.., Zucluy wer0 merged into1 subsumed by1 tmd exti11guished through Change Order 4.

l'Olti AU'fllO!U'I'Y 1SSffiCONOAMI£Nllg!) RESl'ONI>ltTO ZACJIRY'S lU!:QUES'r FOR nlSCLOSURE PAGI!.lU

Zachxy is not entitle-d to recover from the Pm:t AttthOlity based on any alleged breach by

the Jtort Authority of the Contract because the damages sougbt by Zachry at'e consequential

daroag1.-.s and thus barred by statute and by principles of govemmenta! immunity.

Zachry 'is not entitled to recover from the Pm·t Authority based on any alleged breach by

the 1)01t Autbority ofthe Contract because Zachry ratified the Port Authorlty~s alleged actions

aoif inactions.

Zachry iu not entitled to recover from the Port Authority based on any alleged breach by

the Port Authority of the Ctmtract becmum Zachry waived the complaints it makes in th1s acGon

and any right that it may have llad to lodge a clmm for the Port Authority's alleged breach nf the

Contract,

Zachry is nol entitled to recover from th('< Port Authority ba.'Jcd on HtlJ aUugcd breach by tht) Port Authority of tho Contract because Znchry is equitably estopped from. lodgi11g any such

claim for alleged breach of Contract.

Zachry is nr>t entitled to recover from the Port Authority based on tmy nllegcd breach by

the Port Authority of the Co.ntract becautte Zachry Is bam;:d by its own. inequitable conduct und

Zachry is uot eutitl.cd to rectWt1X fron1 the Port Authority based on &t\Y alleged breach by

the .Port Authority of the Contract because Zachry is ban·ed by the doctrines of promissory

Zachry is not entitled to recover from the l'ort Authority based on any alleged breach hy

t11c Port A:uthorlty of the Conlract because Zachry's claims are ba:n:ed by tht' defense ofrcleasc.

Zachry is not entitled to recover fwm the Port Authorlty based on any alleged brcfich by

the Port Authority of the Contract beuatme Zachry's claims are barred by tlw dcfunsc ofpaYJ:Ue:J:lt,

i>Oltl' AtJ't'HORtl'Y)S S&COND t\l\1-&NDEO RESl'ONS!t ·ro ZACHR\'1SlUtQUFSl' FOR l'nS(;!,QSI)lm

Tho accmml des<.:ribing and itemizing the payments made by the Porl Authority on th<~ Contrdct

(the breach of which ibm1s the basis of Zachry's cluim) is attached to this pleading, labeled

Exhibit A, and incorporated herein by reference,

Zachry is not entitled to recover fxom the Port Authority based on any alleged bread1 by

the Port Authority of the Contract because Zachry's claims are ban:ed by the defense of c>ffset

Zachry is not entitled to recover fi:om the Pott Authority based on any alleged breach by

the Port: AuthorHy of the Cont1'act because Zachry acted as a volunteer, voluntarily changing itH

position) not due to any forcn or other conduct by the Port Authority,

Znchry is not cnlitled L\l recover from tho Port Antborlty ba:;od un any alleged brcauh by

lhe Pent Authority of Llm Contract bcoaxisc Zachry's c~ain1s are burred by tl\e defcmse of1melean

hands.

Zttchry is not ootitled to recover from the Port Authority based m1 any nllegcd breach by

dte Port A:utltority of tl1<~ Contract becrmse Zachrfs claims ate burred by Zaohry1s owu bud faith condnc£1 arbitrary and ¢npdclous acts and omissions, and conduct lacking any rea~onable basis.

Zachry is not 011titlcd tQ recover from tho Port Atti:hority because any damages of Zachry

were caused or contdbut~d to by its oWJl breach o)" duty, Ih-ult, or misconduct, m; the breach of dtrty, fault, or misconduct of others for whom Zachry is responsible in law.

Zacllry is not entitled to recover from the Port Authority by virtue of Zachry's trC".atmcnt

of 1ho Contract as continuing and) in addition, insi~fng tl1at tho Port Authority pedbrm tho

Contract, precluding any claim by Zachry of any defense of pdor matetinl brcftoh, under tho ' t'l \(\ doctrine of cl ection of remcdie.s.

Zachry is not entitled to recovor from tho Port Authority by reason of Zachry's conduct

thut U!.\tivoly intt:n:fotcd with (a) th" wot'k of Zachry's subcontractors1 and (b) the Port Authority's

PORT AUT!lORlTY'S SECONJ) AMENOKO Rm:roNSft TO ZM.!Illt\')S lt!Ul'O,!!;S'l' !<OR JJISCI.OSUHE

rights nndtw the Cmttraot1 including Zachry's obligation to provide acctlrate and timely

inibrmation, us required by the Contract.

\ '

The Port At1tb.odty denie-s that it made any ruisrepresentations to Zachry. ln the

alternative~ to the extent that Zachry alleges 'the Pmt A'utholity falsely represented any matter

(either affmnatively or by notHlisclosure), any such defense is bat1'ed by Zuchrts actual

knowledge of falsity.

Zachry ill not enUtled to recover n·om the Port Authority on the basis of any alleged

"l>ttss-throughll claim, The alleged injured party (a Zachry "a:fi.iliate" now known as Zachry

Consirnotion Cm1xn:atio.n) did not exist at the iimf> of the alloged breach by the :Port Autlmrlty

ami was not injured by any actton or tnaction of tht: .Poli. Authority. !further, there is no claim the

alleged injured l'art)' is entitled to assert against Znohry or for which Zachry is liable that forms

the basis .of the. ''11ass~tlmmgh:" clait'li.

?;uchry is not ~:;ntitled to recover from th($ Pmi Authority on fu0c basis "f any alleged

control of Zuohry in violation of 3.15> Zachry ceased to employ on~slte &"rrporvision in violation

of 5.16, ltnd Zachry ceased self~performing any of the Work and engaged a subcontractor not

disclosed to tho Port Authority in violation of Section 5.11 of the General Conditions.

Alteruatively1 the Pmi Aulhority's .imrrmnity ~om suit and liabHity precludes Zachry

from rocovoring damages for or on behalf of any other party or entity, including without

limitation those Zachry seeks pursuant to its 1)elatedly disclosed and J)led •<pass-through'' claim.

l'Oftl AUTHOltfr\'~S SECONU.AMlli'lD!Ul lm8t'Ol'\Sf; TO 2'-ACUltl.''S !U\Qti~S'l'Wlt lllSCt.osurn~ l'AGE 13

Alternatively) the Zachry Hafftliate)1on bebalfofwhow Zachry asserts a upus~H:h:rough"

claim acted a.'i a volunteer, voluntarily ohanging its position~ not due to any force or other

oonduot by the Port Authority.

ln the event Zachry does not prevail on il~ cl~ the Fort Authority is entitled to recover

its attorneys• foes pursu{Ult to SectiorJ. 3.10 of the General Conditions ofthe Contract.

In general the factual bf!sis for the Port Authority's defenses arc as follows:

The wharf and dred&l{ng work undet· the Phase lA Wharf and Dredging Contract (the

"Project") is one of th0 various pxoj~ts planned by the PortA1.1thorlty fot· the Bayport 'rom1irml

Complex ("Bayport"), Baypcnt is being constructed over n period of yom:s and tn several phaJJcs.

The various phases of Bayport are planned to t~'{ult in apl>ro:;dmately 7,000 feet of wharf~ 380

acres of contnh1Ct: yu.rdsl multiple gate facilities nnd other irtft1tstructure and improvemeots1

including a ct·uiso tenuinal. The pl'ecise nature of' each phase an.d the tixning ofits construction

depend upon a vnriety of factors, including availability of ftmds, envh·mlmental pcnnitting

limitations, md the cl1anging demands of the Port Authority's cmtomt'!~. Phuso lA was the

initia1 phasB for Bayport. The Plmso lA wharf was originnlly 1,660 linear feet. A 332~foot

extension of the dock was latcl' added by Chat1go Ord<:it' No.4.

In 2003, tho Pori Authority requested Competitive Scaled Proposals for its Phase lA

\V:hnrf a:mJ Dredging Contract c·contractH). Zachry decided to I>tlfSUC tho work for its owu

business pttrposest in an effort to move into a .n0w line p f work, mi!nely, lht7 marine construction

business. Zac1n·y :mbmitted a response nnd actively sought the Contract from tho l1 ort Authority.

In seeking the Contract, Zachry mnde many nmi varied repre~;~eutnli<J1lS to the Port

Authority regarding lis ability to meet, attitude townrd, and commitments to the Port Authority's

goals in connection with the Project. Zachry represontcd to tho Port At1thmity that it would do

POR'r AliTHOlUTY1S SECQNP AM.!LNJ>El1 REIH'ONS!~TO /',ACl\ltY'S lmQtr~l' ltOJA D!SCLOSUlUl everything necessury to emmre that the Bnypott facility was constructed properly. Zachry

promised th0 Port Authority that, HYour Vision is Om· Pnrposen; t<We, , , stand by our fmanciul

commitment~ 1A deal is a Deal! m; "We aspire to a partnership that focuses on our Customer . . .

and small businesscsn; "We avoid the clauns gm1e.n Although the Port A11thmity relied on these

representations and promises in tnaking tho decision to award the Contnwt to Zachry~ Znchry

soon abandoned them.

Zacluy identified two of the Port Authority's primary goals with respect to the }'.base lA

activities: {1] supp{}rting and mcntoring tegimml small businesses, and [2] complyi:ng with t11e

NOx emission limitations tlmt the Port Authority was required to m00t under tllc permit issued

by the U.S. Gt:rvormnent. Zacl1ry' s goal was to convinoo the Port Authority that :Zach1)1, better

thun any other contt·aotor} would achieve those goals. Zachrts mMagement at the highest

levels, inc1uding Da.vid Zachry, n1ade prm:ttise~ to the Port Authority about what Zachry would

do to achieve the Port Authority's goals. Zachry prnm!sed that it wonld mecl the NOx emissions

limitations through such cunstrnctton method~ as using mmveyor systerns to movt1 materials and

constru.cting the whm·f <'in the dry" by constructing a large berrn or dike arrnmd the wor'k area,

freezing tho berm, and !hen. removing the soil beneath the wharf. Although Zacmy had tlO

experience with these novel constmctiou methods, Zachry reprcsente<i thnt Jt possesst:d the

expertise to effectively utilize these technologies, B~;~t Zachry failed to perfoxm the necessary

investigation# scheduling and due diligence nmilysis of the methods and. toolmologies it was

promising. l<'or e;u\rnple, Zachry lmd uo plan for excavating "in t1te dryn the materiu1s under the

deck !:lJld an:mng !he 1nm.droos of piers, Zachry concealed its defloiencies from, the Port

Autho11ty, which relied on Zachry's assertions,

f'Olt'f AUTIIOR1'l'Y 18 SJtCO!'{[) AMENOliD 1U1:Sl'ONS!l' TO ZACHRY'S ltl~QUJ<~ST l"OJt DlSCf.OSU!m

AJthough Zachry's base price was $3.5 million above the low j>T011osal) Zachry's

p:roposal was selected as the preferred proposal and the proce-ss of negotiating a specific contract

began. As a result of these negotiations, under the Contract, Zachry agreed to contractual

provisions that assigned the dsk and responsibility for loss resulting from events and probLems

that :might ruise during Zacl1rts work on Project. In effect, Zachry agreed that it could handle

ru1d wot1ld boar tl1oso dsks. Zachry conveyed that the HZacley way" of doing business vrould

minirulzc the possibility oftlmt risks might occ-ur.

Modifications cont~ined specifically negotinted provision!.> providing additional benefits to

Zachry for particular risks assumed by Zuchryt such ns au il1crcase of $2A million ovcrZucllry's

ori&ri.nally proposed Contract Prl<lf! fur increases iu the prices of materials and an additional

$50,000 fol' project management ovcrlime.

Some of the moro important risk-allocating contractual provisions contained in the

Controct include:

o Zachry accepted· entirely the risk of there bch1g any :tacit of completeness in the

those doomtu~nts uot being sufficiently detailed and cotnllrohensive. Section 2.06 of

the Contr~~cct's General Conditions.

" Zachry aoocpted the risk of all cb·cnu;stances affecting porformru1ce of its Work,

Section 2.06 of the Contract's General Conditions. Zachry's complaints, such as, its

olaim that the Wol'k ttuned out to bo more difficult, expensive and time-consuming

than it cxpocte.d bemmse of the hru-clness of the Beaumont clay under the dock and

among the piers, for exrunple, is a risk that Zachry as:nnued.

l'ORT AUTllOUn'\' 1S ~~CON)) AMENDED RESI'ONSU TO Z.4CU!W 1S J{b;Qtl!tf."~ [I()Jt DISCLOSURE PAG!tl6 • Zachry accepted the risk ofworldng a1·ou:nd the Port Authority ships that might: be

1.1sing the wharf .Sections 4.15 and 5,14 ofthe General Conditions.

a With respect to monetary losses or dumaga'i fuat Zachry might sustain ju performing

tl1e Wodc, Znohry agreed to a .no·damuges·fm:~delay or hindrance provision. 'Illis

moons that Zachry is not entitled to :renover for damages from the Port Authority for

delays or hindrances that occur ln cotme<~tioJl with the V'lork1 evett if the delays or

hindnmces are caused hy the Pmi Authodtyj Zachry's ren1edy for delays or

hindtunces v,:as to seek an extension of time. Scx:tious 5.07 ttnd 5.14 of the General

Conditions. AU of Zachry's claims are dclay or hindtanoe dmuagt} claims and,

& Zachty agreed th<tt it Is not entitled tt) any i11crcase itt the C0111ruct Price except under

limited. oin.mmstances. Section 5.43 of the Contract'M General Conditions SJleci:fies

that the only sections of the Contract tlmt allov1 Zachry to seek an adjustment in tb.e

Co.ntrnct Price are Sec!.tons 5.41 (0xtt.:a work directed by the Port Authority), 5.42

effect a chango in the Conlract that requires a modification), 5.49 (suspension of the

Work by tho Port Authority} and 5.50 (aocelerntion of ili:c work by !:he Port Authority

for re41sons other than delays caused by or attl:ibutable to Zachry), Znclrry 1s claims do

not entitle it to a Conu:aot Price udjustrnent. .

• W'ith rt'.spoot to an extension of tho Contract Time, Zachry accepted the risk of

in<;rcnsoo time being required to perflmn 1he Work tmder all ciTmm1.stances) except

when the circumstance constlt:ute:-Jnn event of fbroo majeure- and Zanht)' also agreed

to a limllt:d ibn;e mtgt:ltn-e provision. Sections 1.18 and 5.08 of the General

r'Oltf A:IJ'niOlU'l'¥1 8 S~COND AMENDED Rli:Sl'ONSJJ;TO :r.,r,CUtt¥'SHEQUitS'I'1f0ItD!SCLOS!JRE PAGE 17

Conditions. Moreover, if the event constit\.1tes a tbrce majeure ove11t, Zachry

accepted the Tisk of the delay, except wherey the delayed activities are on the critical

path (Sootion 5.08(b)(1) of the Gcncrru Conditions), and even. then Zachry is not

entitled to any extension of lime if there is also occurl'lng an event of Concurrent

Dolay. Section 5.08(b)(6) of the General Conditions.

~to Zachry agreed that, for n1J events for which it cltose to see!<: an extension. o!1 the Contmct Time, it must timely file a claim meeting the requirements of the Contract

Zacl!J)I agreed that it waived any right to a time extension if it failed to timely flle a

request for a time extension that met the requirements of the Cnnti·act. Section 5.08

of tho General, Conditions. Zachry's alleged claims for hrench ()f the Conttact are

harrt~d because Zachry did not timely file requests fur & time ox tension.

dates. Zachry agree-d that if it failed tbr any reason to mtX'lt tho completion milestones

specified in Section 10 of the Special Conditions, or failed to complete the 'Work

within the agreed time, the Contract .Pric.iC would be reduced hy certain specified

(Addendum No. 8). Zachl'y failed to 111eet fue deadlines, 1Uaking 'the Port Authority

entitled to liquidated damages, Specification and Proposal, Page IH~l5 (Addendum

No.8) and Sections 5.05 and 5.06 of the Oenonll Conditions.

Because of itl! de:;lre to ohtaln thiR WOJ'k, 7.achry made speoiaJ promises that are

emhodiedin Ek~otions 5.10 and 1.37 ofthc Contraces General Conditions. rn Sections 5.10 und 1.37, Zachry agreed and promised that it wonl<l perform the Work using; Zachry's best skill and

attention~ in a good und workrmmlike mum1eJ't and in the best and most expeditious and

i'OR'l' AU'l'UOlU'I'Y'S 1JJ£CQNI> Ai'rlKN.Ol,:U !U!Sl'ONS!<;'I'O ZACHRY)S RKQU!!:S'f li'OR l){SCLOSUR!i: PAGElS economical manner consistent with the interests ofthe Port Authority, and would utilize its best

skill. efforts and j\idgment in furthering the interests of Port Authority. This promise and the

other '¥arious promifleil made by Zachry to the Port A11thorlty in order to obtain the \Vharf and

Dredging Contract created a special contractual relatlonsh.ip, giving rise to a duty to disclose

owed by Zachry to the Port Authority, (:liven this l'eiation.ship, Zachry's duties to tho Port

Authority htoluded a duty of honesty, candor a:nd disclosure of matcdai f:aots, inchtdi.ng facts as

to schedule mtd Zachry,s intent and hclictsr as respects matters impacting the Port Authoritts

int tltoots.

<~AreaN' by an interim Milestone Date ofFohmary lJ 2006 in order to aceommodate the axrlval

of the four Chinese container eranes and to provide sufl1cicnt tin1c for the Port Authority to

attendant cran~relatod. tflsks so that the wharf <:<mld be fully operational. by the final completion

date of July 1, 2006,

One of the Zachry representatives involved ln pm'SUing tho Contract was Gary Kuhn

Contrn<..1 to Zachry~ Kuhn would be Zachry's Project Manager or Project Sponsor !illd closely

involved with the Project. Kuhn participated in making the prom1sea that Zachry made to obtaill

thu Contract; Kuhn had stated that ho helievod in carryi?g-out those promises~ that he believed in

njxt.rtueringj; }"*llh the Port Authority !U1d Zachry's subcontractcn1l, ru~d thut he believed in

applying the constmction prlndples known as Lean Construction, Du:dng pnHmnstruction

mcetingst K11hn reutized that because of Zachry's decision to construct a berm around the wharf

and work in the d!)'1 Zaohry would have to largely complete its \>Vork by the tirne~ the ortme siJip

l'ORT AUTfl~)ftl'!'Y'S SECOND AMEN.OltD RltSI:ONMit TO ucnRl''s llliQOteSl' 11oR nv>cr.osum~ arrived or else Zachry would lnter find itself working in tho wet. Ktihn represented to the Port

Authority that Zachry \Vould achieve this objective. Ku..hn also was aware of the Port Authorityts

concerns that Zaohry''s chosen soH freeze method of construction might place tl)e Port

Authority's drilled shafts at risk and agreed that Zachry would address that concern.

Before Zachry and the Port Authority signed the Contrnct1 KUhn convinced the Port

Authority to lllso award the Phase 1A Contninm' Yard Contract to Zachry. This fnct so impressed

ZachryJs San Antonio mamrgemeut that Zachry decided to remove Kuhn from l1is position of

Project Mmmgor or Sponsor for the Contract and tl1e Container Yard Contract, hri.ng him back to

San Antonio and Hssign him a business development role. Zachry conc~alcd thi.s decision from

the Port Authority for weeks.

In removing Kuhn ns Project Manager or Sponsor1 Zt~,chry removed n por,son wlio dirct:tly

participated in per~::uading the Port Authority of Zachry's ability to perform tho Contract, who

Zachcy tontoo uslmvlng the background and experience necessary to manage a project of this

Zucbry's decisiotl to remove Kuhn loft tbe Contract without a Project Manager or

conunittcd Sponaor. Zachry made this decision solely for its ow11 benefit, knowing th~tt there

wns no other qmilifioo person within the entire ZachJy orgnnizat1ou who was uva11ub1<;l to

perform the duties of Project Manager. Zachry was forced to quickly find a replacement for

Ktilm. Zachry hire<l Harold <tAndyn Anderson ('~Anderson"), an. individual without the

bnckgnmnd1 oxpcrioncG or skills uece,'lsBry to manage a project of this nature and magnitude.

Andetl.lort, from. U1c inception of his involvement, did not believe in soil freeze

technology) nor did ho believe in the pdnciples of Leru1 Construction; nor did he beHove ill

establishing u "partnering" relationship among the snbcontractors1 uor did he beHove in 11sing>

I'ORT AU'I'UflRI'rY'i! SltCOND AMENDED RESPONSE 'PO Z4CIID X'S REQUES'l' FOR DlSCl.OSUm£

supporting l:llld mentorhlg the small business suhcoatmotots. Anderson's !)Osition was that, if he

had his wayt most ofthe subcontractors would be fired and Zachry would self~pcrform the Work.

Anderson did not belio\'o in open lines of communicnttion and dialogue with the Port Authority.

Anderson told his subcontrnctors that they were prohibited fh1m tfill'Jng to !he Port Authodty.

Anderson did not believe in fostering a working relationship with the Port Attthority, Anderson

considered the Port Authority and !he Consttootion Manager, CH2M Bill, to be 11Je "enemy."

Anderson told his staff that he "wanted to sec all ofthe heads of tl1e Port's employees on stakes lining Port Road." Andt->rllon instructed his ~taff and snbcon.tractors to "cmsl1 the Port.t>

Anderson beHoved in ''playing the claims gam.e." When Anderson lC!lmcd of the promises that

Zachry lmd mude to the l)ort Authority to got t11c Ckmtmct, Anderson ridiculed Kulm for :making

Voldemort," tho man in the Hurry Pottt.w stories who is so evil that his mmm cannot be spoken

ulou:d, Anderson was :not truthfuL Virtually utt of this was conoouloo from thr> Port Allthority by

Zachry,

Althcmgh Anderson was the wi'ong choice for the position ofl1rojcot Marmgor1 Zachry

put him in cha.t'ge of the Contract and left him in churgo and large1ytmsupcrviscd for eighteen

months. The person at Zaelu)l who was Anderson's direct rcport1 Greg 1v!cVey1 did little to

supervise or ooutrol Anderson. Fred Lucck1 to whom McVey reported, was 1axgoly uniuvolved.

It was only at the insistence of the Port Authority that Anderson \vas <:rvontually removed from {j Oil t11o Projeet, after the harm that he caused became apparent. Ntwcrthcless) Zachry resisted &:

' (">-,l removing Andenmn from the Project, and although Zucht)l later told Anderson to quit or he if';

!'-< r·~ ·-r f>r'f would be fired. and told McVey that ho too Heeded to leave as Zachry hod lost faith in hun, "T t .c .,. :::

. Zachry}s corporate attitude even today prevents Zaclu:y from admitting that it mado a mistake in .f. E 0 E PORT AUTUORI'f\'~S Sll:CONU J\1\<lliNOED lti!SI:'ONSE TO ~ ZACHRY'S REQUIS."l'l' VOlt tnSCW1ltiRE

~ \.::::

t :...; .f< ..e::~ it:~'!. ~;};;

. ~

' ..

placing Anderson in the position of Project Manager; Zachry's management has stated that,

given the chance, it would place Anderson in charge ofthe Project all over again.

Early on mthe Project, \Vhen the Port Authority lemJ.led that Zachry proposed to \VOt'k Hfn

the dry" and accomplish that task by constructing a large berm and n·eezing it, the Port Authority

expressed its concern that frozen soil could adversely impact the Port Authority's drilled shafts.

Zachry agreed to keep the frozen soil away from the piers in order to eliminate this risk. Zuchry

now makes the specious claim that the 'Port Authorlty had an obligation extending l1ack to 2003

to somehow annlyze nn.d :re~engineer its dock to accommodate tll{) :;oil free"e teclmology that

Zachry decided to use on this ProJect. Wlrll<> the Port A11U1ority does uot bave the rig11t to select

or prescribe Zachry's meth<Jds and means of construction,· the Port Authmity does have tho right,

under the Contract; to requtre Z~chry to uwviso and r~submit' 7 or to reject Znchry's methods and

means of construction if those mco:thods lmd means. or if Zachry~s onlet of work, ox time, manner

and n~etllods of prosecution, ure not in compliance with Zachry's Standard of Cffl."C1 o1· plnce in ,

jeopardy Zachry1 s Wm:k or the wharf, or would violate otl\er terms of the 'Contract Documents~

such as, fbr example, the Technical Specifications for Temporary Facilities and the Technical

Specifications for Shoring Systems. The 11ott Authority ucoepted Zachry's repre._~eutation that

Zachry was capable ofma1dng the soil freeze methodolot5Y a success. And, when Zacbry agreed

that the freezing effects of the mai~l :freeze wall wo1~ld not get withln nine f-oot of any drilled

shaft, the effects of the fhlezing on tl1e Porl Atttho~lty's drilled shafts beca1ne a nmkis~me.

Accordingly; there was no need for the Port Authority to have its designers and geotechnical

engineers aualyz,e the impact ofpossible fi:eeziug of tho soilarouud the drilled shafts,

l'OKJ' AUTIIOIU'l'Y'S SECOND AMENDED RESPONSE TO Zi\Cillt\:' 18 llliQUEilT FOR lllSCLOSURt~ 1'AGR22

Zaciny engaged in various acts and omissions thut had the effect of delaying and

hindering its performance of its own Work under the Contract; as reflected by the following

exmnples:

Zachry was :five weeks late in complying with the Contract requirement for the crt;-;ution

of the initiaL Baseline Schedule. Discovery in this case has revealed that Zachry's Project

scheduler wns inexperienced in the creation and management of schedules for oompJex projects

and that Zachry itself concluded its Baseline Schedule was imu:leqtmte and did not reflect

Zachry' R vmrk plan.

From the outset, setting the (:oncretebutch plant was on the critical path ofihe schedule.

Zachry was signiflcuntly late in the completion of the setting of the hatch plant. Completing the

<:oncrete mix design was also on the critical path of the svhedllle. Zachry v/as ulso sigoificautly

late completing the mix: design. These delays at the start of tlm Work hnpactod the tiu1e1iness of

Zachry performance iu causing delays that negatively impacted , tbe entirety of Zachry's

porfm:mance~ ·

From. the outqet1 Zachry !m.e\v offhe possibility of a concrete material shortage during the

term of the Contract. The concrete shortage issue was addressed at Zach:ry 11what-if' nieetings

$horfly after Zac1uy occupied the site. Zachry could nave actod to reduce the risk of concreto

material shortages {t.mch as, for example, by t10Usf:rncting a silo iu which to store the concrete

materials), hut Zachry decided not to take any of thos_e actions in order to save money, L.at\1r,

when the anticipated concreto material shortage occurred, Zachry claimed that it was ''beyon:d its

controt>• and claimed it was entitled to an extension of the Co11trnct Time ~ even though :it was

clear the anticipated concxct\3 material shortages v1ere not an event that would entitle Zac.hcy to

PORT AUTHORITY'SSftCONll AMltl\'DED Rl!Sl'ONSU TO ZACIIRY)S REQlJES'I' I•'OR DISCLOSURE t'AGJ~23 an extension of the Contract Time. The <lelays ill Zachry's Work caused by lhese concrete

material shortagoo were entirely the responsibility of Zachry.

Some of Zacht)'1s wm1< with respect to the drilled shafts was defective. In 2.005, Zaclu)'

&'PI'nt a ~ubstantial nu:mber of days reworking some of the drilled sl1afls it had already installed

and addressing neCking and :pier caps issues. This work delayed and hindered Zachry's.

\X>nstmction of the wharf deck in the areas of !:lu:-.sc driltoo shafts until the repair work was completed.

Zachry's work on the under-side of the deck itself \Vas defective in many urea~. /.(lchry

engaged in tmdenleck patohiug to ropuir drilled shaft:.s1 bullnoses and voids tmder the devk,

thereby limiting and delaying underdeck excavation. Zachry began cotrecting th1s defective

work in, Jattl 2.005 and the repairs continued for 1nonths. All of tb:is repair work delayod and

ldmlcnx:l Zaolwy' ~ txnderdeck excavation.

l.achty wn.~ iate in providing required submitlais to tlJe Port AuUmrity for :review by the

l'm:t Authority and its ccmsultants. Even whtm Zachry provided the submittalsl many of the

stthmittals were iuoomplete or defective. This failure by Zachry caused delays in Zachry's: work

Zachry mude the decision1 in. order to snve mo.noy, that it would retain its soil fr{leze

subcontractor, RKK SoiiFxeeze, only to :fh:eze llt'ound three sides of th(l excavation area.. Zachry

decided that it would selr~perfbtm the cutoff of the water flowing fi'Om the fourth side, that is,

the land side. But Zachry took no action to deterrnin~ how much water: was flowing from the

land siUc into the excnvatlon area. By early 2005, lLT(J{ Soi1Freeze and its consulhmt,

GooEngincern, ·wore warning Zachry that Zachry must determine the amount of water that was

flowing n·oru the land side into the excavation area and figure-out how to control it But Zachry

did not do l!O until early November, 2005. ahnost ten mon1hs later.

•'Ott'!' AU'!'llOIU'l'Y'S SECONI> AMf£1\DED RESl'ONSlt 1'0 ZACIJRY,S REQUF.S1' 1101\ lHSCLO.\iUHl': PAGEZ4

For almost n year, Zachry's dredge work- nn important component of its Work- was

little to nonvcxistcnt. Zachry itself was not cnpubl~ of performing tl1e needoo dredging, so it

8!3bcontraoted that work to Continental Dredging, Continental Dredging's equipment was

frequently broke doW!i, a11d 1 as a result1 dredglng fell far behind scbedu'Je, Zacluy eventually

terminated Continental Dredgin& commandeered its: equipment) and filed in a ltlwsuit agalm;t

Continental Dredging.

Znchry titiled Lo timely implement its chosen means and methods ofltsing a freeze wull to

oons!Tuct a frozen berm that tvou!d allow Zachry to \1\tcavate in the dry. Zaclu:y delayed until

Febmary 24) 2005 to even sign its Stibc<mtnmt with its freeze wall subcontractor, RKl(

SoilFretr.,;;e, This tlt:lay ¥vas solely Zuchr.ts decision !Uld fa1.1lt. It was :not until March 15, 2005

Zachry then decided~ for its own benefit, i.e., to cut its costs~ that Jt would rep1aoo its

qualified suboorltl.'ll.t:tor, Fanner Foundation, which bud been trained by RKK Soit.Freczc in the

installation of the freeze pipe, with au1mqualified ~ butless expensive-~ 1mbcontractor, 'BoMac.

n was not until Sprlrig of 2005 t11at Zachry fiuruly began i:nstalli11g freeze pipe in the

frcttze wall. In ordct· to save some money, Zachry decided to install US(Jd, corroded and thin

fh~crze pipe.~ Into the enrt..h.cn berm·"' pipe that did not meet RKK SoilFreeze's or Zachry's O\vrt

speciftcatioilS. 'This decision was madv by Zuchry solely for its ow11 benefit

Zachry not only installed defective pipe}' but Zachry, though its subrontractac, Bolvlac,

did not install the fi·eeze pipe in a good and workmanlike manner~ in accoi·d with the

requirements ofthe :freeze wall design. instead1 tho pipe was installed lmpJ:<IpeJ'ly) with pipe that

was too short or out of alignment. Some pipes w0re installed in the wrong 1ocauon or at the

inoonect inclination; som.e pipe-s were dan:tfiged in the installation process. Eventually, tJVcr

PORT AtJTllORl'n''S Sl~CONU AiVHI.N O!SD 1Hr.SPON&g 1'0 ZACHR~'SJt!'tQUl~S:l' liOR P1SCLOSU1U> 70% of the l}ceze pipe failed und had to be replaced, It was not until mid to late October~ 2005,

that Zachry comvlcted the task of removing and replacing the defective pipe. Moreover,

although RKK insistod'timt before any part of the freeze wall was activated, Zachry must voucl1

fhr the p:t·opcr installation of U1e freeze pipe, Zachry insisted that RKK certify to the proper

installation, Appnrently~ neither wo1.1ld certii)',

As u result of these and oU1er omissions and failures, whic1l delayed Zachris work,

Zachry fell so far 1'ehind sohcdttlc that it was too li1te for Zacluy both to tttiHze llie freeze wall

and meet U1e interim milestone date tor Area A. As the result of its own errors and mistakes,

Zachry made the decision to abandon the fteeze >vall, exoovate to the extent possible "in lhe

dry," and then excavate in the wet. Zachry terminated RKK SoilFrc.mze's contract, and gave

false oxplanations for this decish:m, Zachry e~1gaged in rut m'bi.tral:ion, a 1>rivate lawsuit, \Vith

RKK SoilFreeze. at one point threatening the Pxesid~~nt of RKK Soil Freeze that Zachry would

Zachl:y attempte<1 to conceal from tbc Pmt Authority the trutl1 as to Zachry's schednle

problem$, m1~ what wa.<J occmrlng and was not occurring on tho site, ·wheu the Port A11thority

uskcd about 1l1o stacus <Jfthe pr~toot, Zachry represented. to the Port Authority that 11tWelything is

fine}" ~<we will.not only meet the milestone dates, but tve will finish em1yt and ''lvo will provide

co11Huucd to send progress schedules tu t.h~ l?ort AuU1pdty 1nisrepresenling that Zrtclwy was on

schedttle a11d that Zachry would meet the req11ired luterin1 milestone date of Fehnuny l, 2006

and tlw fimtl completion date of Jnno 1, 2006, Those ropresentntio.us wt:Jre flllso.

The undisclosed truth was that by latc-Febnuu:y or early'-March of 2005, Zachry realized

lhai it was so tax behind in its Work it could not meet the interim milestone date ofFebmary 11

l'OlrtAlJ'rHOlU'l'\' 1S Slt<.'ONI> AMY.N!)EO RESf!QNSg'l'o ~ACilRY'SlUtQUlli>l' !>'OR DfSCLOSURE 2006. At thatthno, Zachry conceived the idea of dividing the work into two compcments througb

~

gootoobruC~tl. engineer, OeoEngincers, about clestgnjng such a cutoff \'i.1all for Zachry, which

would be paid fbr by Zachry as part of its oonstruction means and methods. Zachry instructed

RKK SoilFroeze and GeoEngineers notto discuss the-se issues witl1 the Port Authority.

Under the Contract 11s asvanled 1 the dock component oi'was comprised off'iV<l sections of

332 feet each. rcfhrred to as Scotionsl through 5l fbr a total of 1660 teet. By eady 2005j with

Zachry reporting NOx emissions that were less fuan thos\'1 all<lClltOO by t11.e applicable

enviromnen:ta:l permit; with funding available~ and \\tith Zrwhry fnlsely reporting that Zachry's

Autho1·ity began considQdng tllc possibility o:f adding a Section 6, In early 2005, the 'Port Authority discussed with Zachry the fact that the Pori Authority

essentially had lwo options w'itl1 re~:pectto u possible S~tion 6: the l'ort Authority cou1d either

(a) solicit t"lOmpetitive propouals for s~ction. 6 (i.e., from interested oontractorn who might

propose to do lhe W<Jrk1 including Zachry, if it was intcrtsre<t), or (b) ncgotiat0 a change order to

t11e Contract 1o ndd Section 6 to the scope of Zaolrcy; x work.

111e Port A11thority has leai11Cd that Zachry W!lS overjoyed to learn there was a possibility

Zachry might convinoo the t>ort Authority to award Zachry a change order that would result in

the Port Authority paying $13 Million fbr a: cut-off. v,trul that Zachry needed .in any evoot>

whefuer or not tho S<:lction 6 extension was udded to the Contract 11m.~, behind schedule to u.

degl'ee uriknown to the ]>ort Authority, Zachry affranatively sought out the dock extension, and

continued to mim:epresent thr<1ugh its schedule updat~ fhe true status and likely Mtlestmie A and

final completion dnies ofthaProject.

l'OHT t\O'JUORITV'S S!GCOND Al\11i)N.IiBD RI~Sl'ONSE TO U..C.IDU';S UEQtJV.'H'ltOR })li)Cl,OSURit

In ti1is time frame, Andy Anderson told RKK SoilFrecze and GeoEngineors to dt;)vclop a

concept for a cutoff wall. Eventually, they developed lleveral <;.onccpts. Ouc concept was a

b~lw~n the sheet pil~ walls, wilh. the frooz:ing surrotmding one pier on Row 13, Both RKK

SoilFrooze and GeoEngineers told Zachry thnt the Pol:! Authority would have ccmoexn nbout any

use of Ute soil ii·ceze methodology ncar t11e Port Authority's drilled shafts. Tb<w told Zachry

there were other concepts they could develop that would not cause as much <X>nJ.:orn for fue Port Authority. Z.achzy told them to proceed with the 8-foot vtide sheet pile; frozen wall concept and

that Zachry "would n.m it down the Port Authority's throat.>t Zachry instructed RKK. SoilFreeze

and Goo Engineers not to discuss these i:;sues wltb the Port Authority or its consultants.

As of AprilS; 2005, RKK SoilFl'oo~e and GcoEngineers had not created a design for tho

proposed cutoff wall. GeoEngineers had no4 at that time, yetputchased fuo soflwure tlntt would

allow it to develop the design. GcoEnginccrs had not determined how the cut-off waH would be

installed or lnter removed. Indeed, at this time GeoBngi:neers had not concluded that a cutoff

wall -would even work. Nonetheless) on April 51 200.5, AJlderson appeared at a Construction

Coordination meeting and, without any prior urmouncementr minimized th(:l :pot1:'ntial impact oftt-

cutoff wa1l concept ibr which Zachry then had no de.'lign. Anderson sketched on a white board,

and :promptly erased, what Zncl1ry has since disingenuously culled the "exact design" or the

"very desigtl" fbr the cut offwul11 when in fact Znchl:>; did not submit n draft de.<>ign until some

five months later, AndersM represented to the Port Authority's consultants in. nttct1dance that

nrrooLJngwas not an issue" nnd that 40 to 50 feet of the Row B piling would be unaffected 1'lythe

freezing, This turned out to be inacv"tll:atc, glvG.n tho content ofthc subsequent cuHltt wall draft design. Zachry mado these statements in rut e:f:1brt to induce the Port AuU~otity to proceed with a

I'Otl:f A\Y!'liQltlT\''S SltCONU AMENDED IU:Ult'ONSE 'l'O ZACIDn:')S ltEQ'UES'l' FOR l>lSCLOStiRll:

chango order fol' tlt(} $13 Million dock extension. Zachry kn.ew that, if it told llte Port Aufhorlt:y

the truth, it would not be awarded the 332•dock extension.

On AprU 13, 2-005, Zachry submitted a price quote to the l1 or~ Authority for the

oonstructiou of the l32~feet of wharf' t11at would comprise Section 6. In !:hat price quote, Zachry

represented to the J>on Authority that "a freezewall ""' cutoff wall" would be used that would

encompass only one ( 1) piling on row t•B" out of the lmnilreds of piers under the wharf deck,

Zaclrr.is 1n'ice quote provided no other written detail about its preliminary> conceptual cutoff

wall conoopt, and, if ihe cutoff wall bon~ nny ~·elatiouship to the preliminary ''-whiteboardcd"

engineering and constructahlllty issues that would be dctalh:.d for the tlJ'Bt time only some five

months lnle:r .in Zachry's September 12, 2005 submittal of a draft cutoff wul1 design. ln tmy

event, at tht) Hme of the price quote, the Port Authority's consultants thought that Zachry might

be able to n1itigatc the freezing rlsk tojust one ofthe piers. as long as whatxwcr fom1al submittal

Zachry evennmUy provided for a cutoff wall design was acct'Ptable, ln tlH~ April 5, 2005

asked .for tho trnt~<Yff dCBign so that it could be revi~wed 1 ood Zacbry committed to pxoviding the

design. Indeed, Zachry Tepeated!y proroised, falsely, t11at it would soon i'ut·nish a detailed design

the 332' extension to Zachry~

'l'b~'reaftcr, Zachry submitted a docmmmt to the Port Aut1mrity ht which Zachry stated

nine (9) udvantagos to the Port Authority if tho Port A11thority V/CI'O to award the <ihange order

work mZac:lu:y under the existing Contruct$ ratbor than the Port Authority seeking cornpotitive

proposals und pnssihly awarding the work to another contrnotor. One of Zaclrry' s

l'Qltl' AU'tm>H.TI'Y'l) SECOND AMENDE» R!lSP()NSR TQ l;ACHIW'Sltll:QtiWJ'fliOR UlSCLOSUlU~ PAGE 29 representations to fue Port Authority was that Zachry wquld perform its existing work and the

change order work such that Zachry would achieve an "uninterrupted flow ofwork,u

After suln:nitting jts Aprill3, 2005 price proposal) Zachry stopped work on a cutoff wall

dcsigt11 even tl1ough Zachry needed to use a outoffwnll whether or 11ot it was awarded the dock

ext~ns:ion. A competent contractor would ha:v~ proceeded to develop a cutoff wall de.sign, timely

provided the design to l11e Port A11fuority and its consultants, and worke(t through the any

concerns of the Po1't Authodty or its consultants to arrive at a solntion.

Zauhry now makes the specious clai111 that the Port AuiliorJty had tm obligation, after the

April 5, 2005 meeting to; [1] stoll the constrnction process and, spend hundreds ofthousauds of

dollars re-designing tho Port Authority's facilities in order to make the design of the facility

comport with Z~td11y's potentiul method~ and means of cnn~iruction; ~md [2] spend the time nnd

money to ret~in commttants to revi(;lW the preliminary~ white-boarded concept. Howe'Ver; under

the Contract, Zachry had the obligation to utilize methods and means of constl·uction that

comported wilh tho Pmt Authority's design 1 not the other way aro1mcl. Moteover, if Zncbry

wished to seek a c1:iangein the Port Authority's desigtt> e,g., lengt1teuing the drilled shafts, it was

Zachry's <>hligation to submit the pro1x'sed change to the Pol't Authority~ which Zachry did not

do. Zachry n1ak('.S this false claim to conceal the fact that Zaclny misrepresontcd Uw facts to ilie

Port Authority during the April 5, 2005 meeting about a proposed C\ltof:f wall, 1md the fact that

Zachry wrongfillly delayed action to develop the cutoff \Vall design tor the Port Authority to

review,

Throughout tlte period of time extending from late April through mid-August of 2005,

Zachry repeatedly represented to the Port Authorily that the design for a proposed cutoff wall

PORT AUTtmttrn''S SECOND AIVlENOlW Rl!Sl'ONSE TO ZACUltY 18 fU:QIJl!:S'r .li'OH DISCLOSUJU1

Wt:IS in progress. Jn fact, during this sru.nc timeframe, Zucl1ry had not authorized RKK. SoiJFreeze

and Goo Engineers to proceed \vith the creation of a de-sign.

OnMay 181 2005> Zachry submitted a revised quote to the Port Authority of$12,572>000

tor the 3321 dock extension, Once again, ln spite of the many uncertainties and unknowns

surrounding Zachry's use of the fh:eze\vail and, Ha freezewall- cut off wall/' Zachry expressly

represented to the Port Authority tlntt Zachry would achieve .mi "nu1nte1'mpted work 1Jrocess."

Ouce ag<•i:u.. Z\ichry expressly Jepresented to lhe Port Authority thut Zachry wonld utilize

Zachry's ''cu.u.ent constmction method.'' Once ngain~ Zachry expxessly represented to the Port

Authority that "a frew;,;ewal!- cutoff wall'' would encomp.ass only one "B'' ro1v pier. Zaduy did

not articulate any schedule concerns~ or impose any time limit on the Port Authority's uc.ceptanoo

of the quote, and provided no ftl\i:her detail as to the ·prelitninru:y~ conceptual. ru1d unsubnlitted

On Jt!ly ll) 2005, Zachry sent a letter to the Port Atttholity iu which Zachry for the first

time oftbred cerLain important clarifications and additions to i.he change o:rdcr being negotiated.

Zaclu:y>s !otter oruitted menticm of the still W.1S\ibrnitted 11desig,rt" for Pa freezeM'IU ~ cut off

wallt Z."tdtry stated that pricing wus based on HZCC having a Wol'king design ~md dr&wiugs for

drill shafts no la.ter thtm A11gu.st 12, 2005'; and nzcC having a workiug design and dtawiugs fo1'

tho Wharf Deck no later than November 25, 2005, 11 Prev:Jously1 .Zachry :hud not assorted any

such conditions. In its July 11, 2005 letler~ Zachry sitp..ply stated ib.at if tho Port Authority met r.J t;[} ., tbe two mile.qtones enum<'rated above; then Zachry would meet fue modified date ofFebmary 15, £" ' 01 2006 for the area required for Milestone A and that Znchry would meet the final cornpletion date •t; ('-> I" ,.., ·~ of June l, 2006 fbr 1h.e original 1,660 f~et of wharf (i.e., Sections 1~5) and the nevt final ~

completion date of July 15, 20()() fhr the 332 feet of wharf (i.e., Seotion 6), Zachry e);:pressed no

PORT AUTUOlU1Y'S SECOND AfliillN()ED MSI'ONSI£ TO ZACJI:RYt$ ttEQUES'l' FOn DISCLOt5Ull.B PAGE31

other schedul~ or timing cooce.rns. The Poit Authol'ity met the two deadlines expressed by

Zachry in its July 11, 2005letter.

On July 25) 2005, the Port Authority Commission approved Change Order No. 4, and on

Augnst 8, 2005, the Port Authority sent a leiter to Zuchry stating) "This letter is to serve notice to

ZCC ofPBA's intent to proceed with this change at the agreed upon cost and scope of work.,

The next day, Zachry commenced perfimning the work tmder.· Change Ordel' No. 4- and the Pol't

Authority becan1e obligated, as Zachry's management uuderstoo~ to pay Zachry for that work.

The ·Pott Authority noted tbat the Change Order had been approved by t1m Port Authority

Commission in the nmount of $12,962}800 1 that the Change Order wm1ld be in Zachry's S~u1

Antonio office lJY AuguRt 1.01 2005 for execution, and that the Change Order i.%s baing

expedited by the Pmt Authority, On Aug·ust 91 20'05 lhc Port Authority scn:t Change Order No. 4

to Zachry1s San Antonio office.

Zachry•s belate~ madc·tor~litigation contention thnt the Port Authority took an

unreasonably long time to decide to award the change order Worlc to Zachry under Change Order

No. '4 is fa1so. In Jeality, ihc;Y amount of thne required to enter into Change Order No. 4 was

reasonable. Th.erc were xnany dis(,"Ussiom.; bctweel). representatives of the Port Authority and

Zachry concerning the logistics of the proposed Change Ol'der. The extension (i. (<,,.Section 6)

was not ever1 desig!:wd when Zachry mtd the Port Authority began discussion of the proposed

Change Order, and Zachry was a\Vai·e of this fact. lJ,ort Authority Commission approval was

req\lirr.d to proceed with the design for the new Seviion 6 and then SectiOJl 6 had to be desigLted.

The Port Authority and Zachry then ncected to negotiate the tenns of a Change Order and1 if

agTe~mcnt wus reached~ tho llort Authority Gomm.isslon would then need to approve the. Chango

Order.

PORT AUTliORlT\'}S S!CCOND AMI~NDEP RI!SPONSJ!: 'l'Q 'l'.iACilltY'S lmQUES'J' FOR !llSCLOStfltE

' '

Zaclu·yts April 13 t 2005 pdcc quote was just that - a price quote, wl1iclt the Port

Authority hud no obligation to accept. If Zachry thought it took too long to agree upon tem1S for

a change order1 Zaohry had no obligation to accept the change by signing and binding itself to

C!:nlilge Order No. 4, But Zachry did so, foreclosing any such complaint On August 29, 2005,

Zachry finally signed Change Order No, 4 ami its attendant Scope, Tune and Price

Modifications, Zachry signed Change Order No, 4 and the Scope, Time and Price Modific-ations

without a.ny reservations of rights, Without any cmiditions or lin1.itations of any typo) and \vith

complete knowlooge of tho Length of time it took to flualiz.e Change Order No. 4, and vlith

CZltnplete knowledge of all of the events and actions that \Voutd be teqnirort of Zachry by Chango

Order No. 4 and the ncco1np!lllying St::ope, Time and Price Modificalion.<t. Any nnd u11 claims

that Zachry might luwe had or wished to assert: for money or time as a rosult of tbo mnount of

timo it took to oftZ.>et Change Ordel' No. 4, (J1' as a tC.'Rtlt of Hie changes req).lked of Zachry to

perform flm change spccifitJd hy Change Order No, 4~ or changes in the mctl10ds that Zachry

contemplated with respect to its original work l.ltldcr the Contract as a result ofthe wodc agreed

to in Cbaugc Order No. 4, were subsumed and pxecludcd by Change Order No. 4 and the

accompanyittg Scope, Time and Price Modificatioos.

Dm'ing t:he negotiations for Change Order No. 4, Zachry lmew Umt it conlcluut Hchieve

tht1 dates it was ugre~£lng to in Change Order No, 4, namely; completion of Area A by February

this Information fi:om the Port Authorityt internally discussing when to come cle!lll yvith the Port

Authority~ but umvilling to speak tmtlrt'ully until it kiie\v 1vhether t11c Port Authority would

award Zachry moro work. Had the Port Authority !mown the truth, it would not have entered

Change Order No. 4, In fact, Zachry misrepresented to the Port Authority during the

l!OR'r Atrl'!l0tU'l'Y1S SUCONl> AM.Ki'<IJBP ItESl'O;>~S}~ TO ZAcr!JlV1S ltEQUKST FO!t msCLOSUl~E negotiations what Zachry could accomplish. Zachry did so to induce the Port Authority into

granting the change order work to Zachry, so that Zachry would be paid $12,9 Million fur a task

that Zachry needed anyway.

rt was not until September 121 2005 ~ aftor the Port Commission approved the awurd of

the Change Otder W~rk to Zachry, after the Port Authority issued ita letter for Zachry to proceed

vvi.th the Work, n·fter Zachry in fuct commenced the Work, and after Zachry executed Changtl

Order No. 4- that Zachty first submitted any details of a draft design fbr a cut~off wall to the

Port· Authority's Construction 1v1ana,gcr, CH2M Hill. This was GcoBnginoors' Sc.,"}Jlcmbcr 9,

2005 draft c~toffwall design.

Za.cluy pleads that the design that Zachry submitted to the Port Authority on September

12) 2005 wus "consistent with its prim· description of the frozen cutoff wa1V; This assertion is

false. In comparison to the dr~:~ft. design S\tb;rnitted on Scptcmbt\l'12t Zachry's prior explanation

to the Port Authority as to the cut..ot't' wall was misleading, Specifically, the September 2005

submittal showed a nortb!sonth cutoff wall that laterally froze far n1ore than the one ''Bn l'OW pier

tmd fi'OZe to sigtliflcantly greater depths than had been represented by Zachry in connection witl1

negotiating Chrmge Order No. 4. Znchty's September 12, 2005. submittal rcqt1ired free:r.ing the

soil around up to 23 oftho \<Vharrs piers ~md il-oze soil close to the bottoms of many ofthe piers.

Moreover, Zachry's contentions that the Septcmbt.'l' 12, 2005 dmtl design was Hthe C){plicit

busi::r for Change Order 4 and nupproved by11 th.e l1ort ~uth.odty when it executed Change Order

4, such that the Po1t Authority "br9acbedn Change Order 4 or the Contract by respondi11g that

Zachry must ((revise and resubmit" the submitted draft design, ure incor.reot as a m11Uer oflaw as

wen as of fact.

l'OllTAUTfiOJUTY'S SECOND AMENHED RESPONSE TO ZACllRY1S ImQIJlli.>"'' J:fQR ))JSCLOSUHE PAGE34

The Port Authority's Constructio.n Mm:mger on Sc1ptember 14~ 2005 fonvaYded the

J

subn1ittal to Jefl' Ely of CH2M Hill to cormnence review of Zachry1 s draft cutoff waH design,

Shortly thereafter, Hmrleane Rita threatened the City of Houston and the Project site, resulting in

a 9-dny extension of time later being granted to Zachry. On September 28) 2005, Zachry's

frozen soil wall designer, OeoEngineers, submitted a supplemental ri1omorandm:n containing

Incorreet assumptions, thus heightening CH2MHi11 til concerll as to whether Zachry's draft crutoff

wall design placed the Purt Authority's drilled shn:fts at risk.

On October 31 2005 ·~more than a wGl?k before thel'm:t Authority's October 11m "revise

and restibtnit" response to Zachry's sttbmittal of the draft cut~offwatl .design -w Znchry disclosed

it:; inability to mee~ its Bmwlin11 Schedule, Specifically} Zaclny projected mittf>inrt fhe Milestone

A date by 35 days, despite havh1g agreed to the February IS, 2006 Milestone A date only a

monU1 b<:fore~ when Zachry signoo the Change Otder;

In its pleadings, Zachry clmracletizeB the Port Authority's October 1111\ respQns0 that

Port Authority's wharf: us (ibait and switch.n By this accusation, Zachry accuses the Poxt

Authority of conduct committed in fact by Zachry. Thus, as patt of Zachry's Hbuit-mul-:swiich"

strategy, nftet Zachry knew the Port Authority was bound to inw Zachry almost $13 Million for

~/!\ Chunge Order 4. Zachry submitted its so-called ' 1August* pxogress schedule s!~owing that Zachry lr":,i

'- q \(", could not complete Area A tmtil March 22, 2006, 35 dttys aft0r the February 15, 2006 date f"\ 1;.J (II) tJ Zachry had corrn:nittcd to meet in order to obtain the dock cxtensiotL lfZacbry hud disclosed c. • 0! \(\ during ncg{)tiation ofChunge Order No, 4 that it intended to freeze th0 soil ru'Ound multiple piers r::::· 'T closer and at great0r depths than Zachry had represented in connection with negotiating Change '"k:" 'if

Q

ii i ., "* 8 E :s l'QRT AUTtlORlT)! 18 Sr~CONO <\i\<f!~NDED ll£SI'ON!11: TO g 0 ZAGlll.\' 1S UEQU.l<':S1'FOR JJISCLOSU!lli PAG:€35 13 \;:::

j ._,

Ordct• No. 4) Uleteby placiug the piers at risk, the Port Authority vwuld not have entered into

Change Order No.4 with Zachry.

On October u; 2005, ln an effort to proceed on parallel pathg of both (a) examining whether the risks associated wlth Zachry's September 12 dmft cutoff wnll dcsit,rn could be

mitigatt.xi) and (b) iuvestlgat!ng \</hether Zachry coold pravkle an alternative cutoff wall design,

U1e Port Authority informed Zachry that its September 12; 2005 submitt~l p:t:esented

unaccoptable risks to the Port Authority's wharf, specifically certain of the wharf'S' piers, and

asked Zachry to submit a revised. proposal for the cutoff wall that would not place the wharf at

risk or would mitigate !:he risk posed by the ctltrent proposal. Tho Octobt:r ll 111 "revise nnd

:rermbmit'' tf..sponso was reasonable under the cir~mnstnncei?.

On the r.mmo duy- October 11, 2005 ~at a CoJlstruQtion Coordination meoli11g; Zachry

:represented it would work with the Port Authority to address the Pmt Auth<Jrity's concen:m 1 a

statement on which tho Pmi Authority and its t•cptesentatives relied, But Zacbry did not do so.

Instead, Zachry StJCretly :rnnde the decision not to formally present tm alternative pt·oposa1 to the

Port Authority or explain t\! t11e Port Authority how Zuc.bry would mitigate U1c risks of the

submitted design,

On October 14, 2.005 1 in light of Zaol1ry•s disclosure that it would not meet the Area A

completion date it had just agreed to in Chango Order 4, the Pmt Authority instructed Znchcy to

provide the Port Authority with a schedule ret.o-very p~nn. From October 14) 2005 onwnrd, ihe

cutoff wall was an attcr.. fuought in Za.ohry's thinking, The issue Zachey was analyzing was: '\~an l ('I •r, we make the required completion dates by using the main fi:c<Y.z.e wttll. 1' Zachry reS1,meoted the

cutoff wall as an ~<issue" only several months luter, after Zachry began louking for ways lo shift

to the Port Authodty the finnncial consequences of' Zachry's managerial failures,

POHT AU'I'UORIT'i,S SECOND AMENDED RESPONSE '1'0 1..ACRltY1S REQtJF"'>i' J:IOit l)lSC!.OSUltli:

Zachry knew at the time it decided to abandon the .fretr.te wall that the changes to the

draft c:uto:ff wall design needed to mitigate the risks to the Port Autl1ority's drilled shafts could

have been a.coompHsh6d relatively quickly and simply. Also1 Zachry could have ofiered an

explenation as to how Zachry's draft cutoff wall design 1vould protect the drilled. shafts. Zuolll:y

did not attempt to implement either an available alternative cut~off wall design or to provide an

(~xphmotion aiiempti:ng to Justify tho Soptrtmher 12111 design.

As a result of tho Port Authority's October 14, 2005 reqt1est fbr a recovery plan~ Zachry

tor the fir~t time attempt11d to prepare realistic schedules, Tlmse schedules) printed out by

Zachry on or around October :31 and Nlwember l, 2005, almwed thatif7.achry continued to use

learned that t1l.tl delivery of the crru.1o ship oould not be delayed thut long, Zachry also loomed

Umt the Port Authority cxpectt'rl Zachry to constn1ot thl':l faclHty tllat Zacllry bad to agreed to

construct, that li'l, that the Port Authority was not going to accept a dock as tu whfoh Zachry

performed only pa.rt of the agreed work by l>erfor.tning only part of the agreed excavation. Also;

in this time .frmm~, Zucluy's efforts to rocrce its subcontractors to mako false statements about

the unavailability of obillers, in order to obtain un extension of the Contmct Tim.e, had failed. At

the same timJ31 Zachry learneq it would take longer to f~eeze.down and then thaw tho main freeze

wall than Zachry had u,ss~l.t1e<L Zachry also recognized that completing the main lh:H:-.ze \Vali and

tlwu freezing it would be expensive. Jndcyed, it is likely lbat Zilchcy bcli¢ved at tho time lt would

cost less to work in 01e wet than to cou!itme to construct the main freeze wan and pay to freeze it

and keep jt frozen while doing its underdeclc work. Znchry ulso recognized that it had not yet

l'ORT All'J'HORIT\')S Sl.CCONO 1\!VlENPEJ,J Rli:S.l'ONSit 'l'O 7..t.CHlH:' 1S RF.Q"UEST FOR DISCLOSURB taken the steps nece~sary to control the watel' flowittg in1o the excavation area fi·orn the laud side

of the facility. At the same time, Zachry was concerned that there was no guarantee the freeze

wall would work in a saf(} manner, or indeed would work at alL So; for these many reasons; for

its own economic advantage, and in an effort to minimize its own potential liability under t'ha

Contract, Zachry det~r.mined to abandon the usc oflhe main freeze wall.

ln late 200Si Zachry represented to the Port Authority that Zachry would complete the

Work by spcC'J:fied dales using wlu1.t hns been referred to as Plntl B~ nan:tely1 a hybrid approach

involVing working' bnth in the dry and in the wet~ These stateruen1s tnade by .Zachry were either

knowingly fahm m· W{~fe rnade t'ecklessly, The Port Authority relit~d on these topresontat1ons to

its detriment. At the time, Zachry did not say to tbc Port Authority that Zachry's decision to

sw.itch to "Plmt Bn tmcl eliminate use ofl:he H:eczevvnll in its entirety hnd anytl1mg to do with the

Port Atlthorit~r asking Zachry to "revise and rcsnbmW Zachry's draft cutoff wall design

submittal, ln executiv(} n:teetings> Zachry did not state that Zaciu·yts decision to abandon. use of

!he main Ih::c-.cc wall was caused by the actions or inaelions of the llort Authority.

Znehry's hybrid CO!:tSlrnction method (Ptun B) wns :not properly engineered or scheduled.

In fact> Phm 13 did not work within the time frames represented by Zacbzy. When Zachry 1s

altern..~tive lllan l3 tumed out to require more time und expense than Zachry hoped, Zachry

sought to bltune the Port A1tlhority for the resulting cost overrun.

At vnrious times in its Work under tho Contra<:11 Zachry proposed changes to the Plans

and SpeoH1cationR that were not ibr the Port Authority's advantage tmd prcscnl:ed risk to the

f,acility but wore tor Zachry's own benoflt ~~ in order to make Zachry's \Vork easier> m· to reduce

tho scope of tho Work; or to reduce. the cost to Zachry of the Work. Some of the changes would

have resulted in tlw Port Authority receiving Less Mdcr t:ltc Contract than Zachry lmd agreed io

l'OR1' AUTHOlUTY'SI:!ECONO AMRNDliD rutSPONS!i:TO MC~RY'SlU~Q~IJ£-~'1' FOR DlSCWSURR provide. These proposed changes were not for the 'benefit of the Port A'nthoti.ty. The Poxt

Authority expended substantial time and effort analyzing some of these proposed changes in an '

oftbrt to respond in a reasonable way.

Throughout its Work under the Contract and exte,nding into October of 20061 Zachry

~JXe<:uted partiaL releases in r<t'Yor of the Port Autl1.ority without reserving any right to present

further claixns. ln erwh of these pnrtinl reloases1 which were additive to each other, Zachry released the Port Authority front any and nil fmi'het• clabns with the t'espect to the portions of the

Work cou1pleted as of the date specified jn th~ partial release, In its October 23, 2006 partial

release, Zuclu·y released the ,Port Autl1odty :fl'om any and ali further clalms with respect to any

portion of the Work porto:nned on or before A\tgust 31) 2006. Beginning in2008~ apparently a

<liffhrent company began signing and submitting :rele11ses and indt1cing and ncocptitig payment

Zachty's losses ou the Phase lA Wharf ru10 Dredge proje.ct result entirely from its own

(d) The amount und any method ofcalouiuting economic damages.

Performance ofthe 'Work under the Contract '\Vli$ completed i11Jauuru:y of2009. The Port

Auth0rity ctumot know the precise nature and extent of' its damages caused by Zuchry's fuiluro to

timely mMt tho Milestont) A deadline !illd failure to timely complete tho project. The Port

Authodty»s harm includes, without limitation1 additional program :!11llfiagement consultant and

PORT AUl'HOrtrrV'8 Sl!.CONl) AMgNm:n HF.SPOJ\'St?'I'O ZACtll(Y'S RF-QUI•S'I' JIOR D.lSCLQSURE PAGE39

,., ~·

engineering d0S!gn fees 1 additional time spent and resources devoted by the Port Authority's

engineering department, lost business! und Loss ofuse ofoonstrnction materials.

Tho difficulty of quantifying and proving such actual dumuges is one of the l'easons the

pnrties included liquidated damages provisions in the Cootmct. The liquidated damag0S

continued to be assessable uutil tln£~.1 cotnpletion, u1 20091 although tho Port Authority has not

assessed them beyond 2006, The liquidated damages provisions are enforceable terms and

provisiOJis of the Contract, and the Port Authority is <lntitlcd to withhold andlox off.<Jet the

liquidated damages. The liquidated damtigOs were u reasonable forecast of just compensation

because !he Contract provided for liquidated damages in lieu of actqal clrunagcs and becausec the

Port Authority sustained actual damages tn an a:mmmt that is :not disproportionate to the

liquidated dmmtges.

The I'urt Authority has witl:lh.eld reasonable lll11<Jtmts, calculated ba£n1d upon fue parties

contrnctually agreed rates for liquidated damagt';ls. frcn:n payments 1nade to Zachry to justly

compo11sat0 the Port Authority for actual lossos snffercd as a result of Zachry's delayed

cqmpletion of' work,

The Port Authority has nlso been luwrned by Zachry's advunco cruhre dredging, which

was defectively perfbnned pursuant to a cbat,ge order t<> the Contract. The Port Authority has

withheld reasonable an1ounts, calculated based upon tJu~ cost to correct the defective dredging

work and its consequences fron1 payments mude tq Zachry to justly compensate the l)ort ,, Authority for actual loss suffered as a result of the defootive work.

Tho Port Authority is entitled to recover attorneys• feel§ incun:cd in defending against

Plaintiff's claims. The Port Authority hm1 produced docttm(mts showing its aHorneys' ibes

accrue<:! through March. 20091 and has designated an exp0rt who has submittetl reports regarding

~\lOR'!' AOTllOllfl'X'S St<:COND AMENDlm RESl!ONSE TO Y.AClill\' 1j,HUCQUEf:iTFOlt l>ISCWSOR'lt

l .

the Port Authority's a.ttorneys' fees. The fnll amount of the Port Authority's attorneys 1 fees wilJ

not be know until ihe trial of.this :matte-1·is near conclusion.

(e) 11xe nmne, addnbss1 altd telephone number of persons having knowledge of relevant fucts 1

and a brief statement of enoh identified person's cormeGtion with U1e case.

Response:

Advanced Technology Science Englneedng Research eATSER") 1150 Richorest Dr. Houston, Texas 77060 Phone: (281) 999·9961

McKinney, Gary- Lead Inspector

CenterPoint Energy Galveston, 'l'exas l)none: (409) 765-4086 Cell Phone: (281) 382-8578

Maxwell, Mike - CenterPoint emvloyee with whom Zachty communicated regarding electrical reqtlirements for freezewa!I. Mr. Maxwell may be contacted through CenterPoint's attorney> Ms. Judy Liu> at (713) 207~5465. ·

Cl~T?)Vl H1H 7600 WostTidwe11 Road Suite 600 Houst-on, TX 77040 Phone: (713) 462~0161 Fax: (713) 462-0J 65

Bycre> Ron - E11ginecri:ng Doslgu Mru1agerl formerly with CH2M Hill, now believed to be with 1V1offatt & Nichol in Vancouver

Curtiss, Srevc ·- Co!)struqtion Manager, ibrmody with CH2M Bill, :now believed to be with Parsons Brinkerhoff in Virginia

Ely, Jeff·- F.ngtueering Ptojeot Manager

JoJ:mson, Bob- Program Manuger, formerly with CH2M Hill, now believed to be with Klotz

Sethness, Doug --Program Mru1ager

l•Olt'l' AU'l'HO!UTI''S SECOND t\.MENlli;)) RESPONSE 1'0 ZACHRY'S REQt.lf:~l' XtOll. DISCLOSU!tE PAGl?,4l

TAB 11

The Port of Houston Authority's Objections and Responses to Zachry's Fourth Set of Interrogatories and Fourth Request for Production (CR46:13105-16)

CAUSE NO. 2006-72970

ZACHRY CONSTRUCTION § IN THE DISTRICt' COURT OF CORPORATION, § § Plaintiff § § ~ § HARRIS COUNTY, TEXAS § § THE PORT OF HOUSTON AUJHORITY § § Defendant § 151 ST JUDICIAL DISTRICT

T UE PORT OF HOUSTON AUTHORITY'S OBJECTIONS Ai~ D R ESPONSES TO ZACHRY'S FOURT II SET OF INTERROGATORIES AND FOURTH REQUEST FOR PRODUCTION

TO THE HONORABLE JUDGE OF SAID COURT:

COMES NOW, Defendant, The Port of Houston Authority (the "Port of Houston"), and

respectfully serves its Objections und l{esponses to the Fourth Set of Interrogatories <md Fourth

Request for Production served by the Plaintiff, Zachry Construction Corporation nlk/a Zachry

Industrial, Inc. ("Zachry"), as follows:

FOURTH SET OF INTERROGATORIES

I NT ERRO GATORY N0.1:

I 'I ln Your Second Amended Response to Disclosures, You state lhat "[t]hc Port Authority's bann includes, without limitation, additional program management consultant and engineering design fees, additional time spent and resources devoted by the Port Authority's engineering department, lost business, and loss of use of constlUction materials . .. [and] The Port Authmity has also been harmed by Zaclu·y's advance cruise dredging, which \vas defectively performed pursuant to a change order to the Contract."

Please list and describe each and every way that You contend You have been harmed by Zachry in regards to the performance of the Contract. In particular, please de~clibe:

EXHIBIT

(i) The specific harm you claim You suffered as a result of Zachry's alleged misconduct and the date/dates that such alleged harm occuned;

(ii) the amount of damages sustained for each of the claimed harms You allege resulted from Zachry's alleged misconduct;

(iii) the amount of program management and engineering design fees You contend You have expended as a result of Zachry's alleged misconduct;

(iv) the amount of additional time spent and resources devoted by the Port Authority's engineering department that You contend were spent as a result of Zachry's alleged misconduct;

(v) what "lost business" PHA sustained, when, and the value of such lost business You contend \Vas a result of Zachry's alleged misconduct;

(vi) what "loss of usc of construction matetials" You contend was a result of Zachty' s alleged misconduct, and the value of such claimed loss;

(vii) how You have been harmed by Zachry's dredging and the damages sustained as a result of that alleged harm;

(viii) the total amount of damages that You claim to have sustained to date as a result of Zachry's alleged misconduct.

OBJECTIONS AND RESPONSE:

The P01i of Houston objects to the interrogatories as discovery that was propounded after the close of the discovery period of this case and without leave of Court having been requested or granted.

The Port of Houston objects to each interrogatory to the extent that it is vague (''Vague"), unduly burdensome ("Unduly Burdensome"}, overly broad ("Overly Broad") or seeks to impose obligations or burdens on the Port of Houston beyond those imposed by the T<.:xas Rules of Civil Procedure, including without limitation the Rules of Civil Procedure applicable to discovery of magnetic or electronic data. (Each of these objections, individually or collectively, "Beyond the Rules."). The P01t of Houston specifically objects to Interrogatory 1\o. I us Vague with respect to the term "vn!ue, and the phrase "in regards to performance of the Contract."

The Port of Houston objects to the defmition of "Zachry" set forth in puragraph 2 of Plaintiffs Fourth Set of interrogatories and Fourth Request for Production to the Port of Houston as Vague, because the tem1 is defined in relevant part as meaning "Zachry Construction Corporation", a name in fact used by more than one company that was involved on the Project: one is the Port of Houston's counterparty as named, defined and agreed upon in the Bayport «"I Tenninal Complex Phase 1A V./harl' & Dredging Contract; at least one other is not. furthermore, c the Port of Houston understands that the correct name of Plaintiff is now Zachry Industrial, lnc. Il appears that the entity formerly known as "Zachry Construction Corporation" engaged in transactions such that it no longer performed the Work under the Phase lA Wharf and Dredging Contract, without the prior knowledge of the Port of Houston and in breach of the Contract. The Port of Houston objects to the definition of "Zachry" to the extent that it suggests thut the Port of Houston has a contract for the work under the Phase l A Wharf & Dredging Contract with any entiry other than the entity that originally executed the Ph.lA vVharf & Dredging Contract as the "Contractor." The Port of Houston, by its use of the te1m "Zachry'' in these objections and responses, refers to the entity that is the "Contractor" under the Phase IA Wharl' & Dredging Contract.

The Po11 of Houston objects to the definition of "Wharf and Dredge Contract" or "Contract" and each and every interrogatory that includes the tenn "Wharf and Dredge Contract" or "Contract" to the extent that Zachry intends for the tenn ''Wharf and Dredge Contract" or "Contract" to mean that tl1e Bayport Terminal Complex Phase lA Wharf and Dredging Contract includes a greater scope of work or authority or discretion for Zachry than, in fact, it does. For example, Zachry's definition states thal the contract is for the "d~ign, construction and procurement" of a wharf facility, but, in fact, the Phase 1A Wharf and Dredging Contract is not a design build contract or 'm engineer, procure and construct contract as implied by the definition. Zachry's scope of work is set forth in the Phase IA Wharf and Dredging Contract and the Pot1 of Houston will respond in accordance with the actual scope of the Phase 1A Wharf and Dredging Contract.

The Port of Houston further objects to the interrogatories to the extent they would require information protected or exempted from discovery by any applicable privilege or immunity. In all instances, the Port of Houston intends to preserve and claim, where applicable, the attomey/client privilege, the work product immunity, the common interest privilege, the consulting expert privilege, the executive session privilege pursuant to Sections 551.104 and 551.146, Texas Government Code, of the Texas Open Meetings Act, the maritime security privilege pursuant to 49 U.S.C. 114 and 49 C.F.R. pt. 1520, and any other privilege, immunity or other legal ptinciple or rule that protects or exempts from disclosure documents or other information requcgted by the Plaintiff.

Pursuant to Texas RuleofCivil Procedure 197.1 and its comment no. I, parts (i) and (vii) ofthe interrogatories are expressly objected to to the extent that the interrogatories \vould require the Port of Houston to state all of its factual assertions about its subject matter. 111e Port of Houston assumes that in propounding the interrogatories, Zachry is not asking the Port of Houston to marshal the evidence with respect to the subject matters addressed by the interrogatory and the Port of Houston, pursuant to Texas Rule of Procedure 197.1 and its comment no. 1, objects to any request or demand by Zachry that the P011 of Houston so marshal.

Pursuant to Texas Rule of Civil Procedure 197 .2(c), to the extent the answer to the inte1Togat.ories may be derived or ascertained tlum the Pmt of Houston's business records that httve been or will be produced in this case, the Port of Houston objects on the basis that the burden for deriving or ascertaining the answer is substantially the same for the Port of Houston as it is for Zachry.

Subject to its objections and based on the stated assumptions, the Port of Houston answers C'l Zachry's Fourth Set of Interrogatories as follows:

Under the Contract, Zachry was required to complete Area A by February 15, 2006 and the entirety of tlle Work by July 15, 2006. Both deadlines were subsequently extended 9 days for Hunicane Rita. Zachry failed to meet either deadline. Zachry did not declare completion of the Work under the Contract until January of 2009 and continued to work on Area A unlit that time. The Work, however, still is not complete, a point of discussion between the pat1ies.

The Port of Houston does not know the universe of work that may not have been properly performed by Zachry or the universe of Zachry's failure to comply with the Contract. Jvloreover, Zachry has continuing warranty obligations that apply to any work that was not properly

performed by Zachry and the Port of Houston expects that Zachry will comply with such obligations. The Port of Houston's knowledge of deficient Work by Zachry, however, includes deficient crane ruil installation, deficiencies in the fender coatings, deficiencies in the pavement striping, deficient dust plan, and deficiencies in advanced cruise dredging. Furthermore, the Port of Houston has been har-med by Zachry's failure to pay for overtime inspections and the Port of Houston's various concessions in an effort to facilitate Zachry's completion of the work. These concessions include agreeing to allow Zachry to install fabric fonned revetment in lieu of the articulated block mat Zachry was contractually required to install. In addition, the Port of Houston incurred significant costs in evaluating proposals from Zachry in Zachry's effort to provide the Port of Houston with less than it had agreed to provide, such as Zachry's proposal to revise the l.mder wharf slope.

The Port of Houston cannot know the precise nature and extent of damages caused by Zachry's failure to timely meet the Milestone A deadline, failure to timely complete the Project, failures to properly perfonn the Work, and fi·aud. In addition to the readily quantifiable harm Zachry caust:d the Port of Houston, Zachry hunncd the Port of Houston in ways thut are very difficult to quantify.

Subject to the foregoing, the estimated costs associated with the above identiiled known deficiencies in Zachry's Work include the following:

• Cost to correct defective fender coating: estimated as S509,312.48

• Co~>t to install fenders: estimated as $478,450.00

• l'ailure to complete clearing and grubbing on the South side of Port Road:

$25,200.00 (to be deducted from amounts due Zachry per agreement with Zachry)

• Deficient crane rail installation: inspection cost S7,460.00; future cost unknown at this time

• Defective striping: approximately $180,000.00

o Deficient dust plan: approximately $10,000.00

• Cost for Work outside of normal hours: at least $73,536.22 C'l • Investigate means of removing soil from under wbatf deck: at least $24,900.00

'<J • Cost to evaluate fabric fonned revetment: at least $30,246.77 :;[} :c c..

o Decrease in cost to Zachry for substitution of fabric f01med revetment: at least $450,000.00

• Jncrea<;e in cost to Port of Houston for maintenance of fabric fonned revetment:

ij Not yet dctennined .:::.

z- • Cost to evaluaL~ altemrnive anchor design: at least $7,500.00

• Cost to evaluate elimination of revetment: at least $20,170.73

• Cost to evaluate various under wharf deck slopes: at least $245,491 .58

• Cost to inspect and review proposed repair of defective drilled shafts: at least $26,195.00

With respect to Zachry's defective dredging under Change Order ;\o. I to the Contract, i.e. the "advanced cruise dredging" work, Zachry dredged outside of the dredge profile of the Contract, destabiJizing the adjacent shoreline and altering the condition of the site as advertised in hid proposal documents for the Cmise Wharf and Dredging Contract. Zachry's failures necessitated the Port of Houston having the contractor of the Cruise Wharf and Dredging Contract, Orion, mitigate and repair the hann caused by Zachry, The amount of such payments to Orion is $600,000.00.

Tho Port of Houston's harm due to Zachry's failure to timely complete Milestone A and the entire Project includes, without limitation, additional progrrun management consuJtant and engineering fees, additional time spent and resources devoted by the Pmt of Houston's engineering department, lost business, and loss of use of construction materials. The difficulty of quantifying and proving such actual damages is one of the reasons the purties agreed to the Contract price reduction and liquidated damages provisions in the Contract. The full amount of harm caused by the delay is unknown.

Subject to the foregoing, the Port of Houston incurred at least the following additional costs for additional consultant services perfmmed through January 2009 as a result of Zachry's failure to timely complete the work:

• $46,970.85 for Geotest;

• $1,118,953.24forCH2MHill;

• $130,750.00 for Overlond Assessments; and

• $74,617.29torDMJ!vl

In addition, the Port of Houston paid $172,871.82 to Paradigm for services after July 2006 in connection with both the Phase lA Wharf & Dredging l>roject and the Container Yard C'l project. A portion, which can be detennined from the documents produced in discovery, is associated with the Zachry caused delay on the Phase l A Wharf & Dredging Project.

Zachry also caused the Port of Houston's engineering department to expend ao additional approximately 3,299 man hours on the Phase lA Wharf & Dredging Project from August 2006 through Junuary 2009, which represents an expense to the Port of Houston of $220,044.98. Other Port of Houston personnel were required to expend additional time on the Phase I A \Vharf & Dredging Project as well, but do not keep track of their time, so a readily quantifiable amount representing the additional increased expense to the Port of Houston on the Phase lA Wharf & Uredging for their time is not cummtly available.

In addition to the additional expense incurred on the Phase 1A Wharf & Dredging Project for extended personnel time, the time spent by the Port of Houston personnel on the Phase l A Wharf & Dredging Project during this time period would have been spent on other projects, resulting in additional losses to the Port of Houston. These losses of are difficult to quantify.

Zachry's failure to timely complete the Work of the on the Phase lA Wharf & Dredging Project precluded Porl of Houston customers from using the Bayport Tenninal Complex as soon as they otherwise could have. The steamship lines that moved from Barbours Cut Terminal to Bayport collectively increased container volume from 77,586 vessel lifts in 2006 to 102,413 vessel lifls in 2007 (an increase of 32%). At the same time, steamship lines remaining at Barbours Cul Tenninal filled the void left by the relocation of can·iers to Bayport, and Barbours Cut Terminal <:ontainerizt::d cargo still incn::ttsed by 3% over the previous year. The Port of Houston believes that the same full capacity use would have occurred if the wharf had opened on time in July 2006. Thus, the Port of Houston lost over six months of cargo resulting in an estimated $620,000 decrease in revenue as a result of late completion of the entirety of the work. In addition, when the first customer began using Bayport, the customer leased a portion of the container yard. The Port of Houston believes that it would have leased tht:: container yard earlier had the project been completed on time in July 2006, resulting in a loss of lease revenue of $210,000.

BC(;ause Zachry did not complete the dredging in a timely manner using mechanical means, Zachry was allO\'led to utilize hydraulic dredging in the fall of 2006, after the project completion deadline, to complete the dredging so that the Port of Houston could utilize the facility upon Zachry's sufficient completion of a portion of the wharf (albeit still incomplete). The estimated h<mn to the P011 of Houston as a result of Zuchry's use of hydraulic drt::dging due to its failure to complete the dredging within the contract time is ut least $2,500,000. The harm includes U1e cost to manage the hydraulic dredge material and close the hydraulic dredge ponds to prepare for future constn.1ction.

Moreover, Zachry's failure to timely dredge material from the Bayport channel and to excavate material from beneath the wharf deck deprived the Port of Houston of the opportunity to have the matetials available as fill as soon as the materials should have been for usc on other projects. Thus, fill material that should have been provided from one or both of such sources, because of Zachry's delays, had to be obtained from borrow pits at an estimated cost of $470,000.

C'l The full amount of the harm to the Port of Houston as a result of Zachry's failure to timely meet the Milestone A deadline, failure to timely complete the Project, and failures to properly perform the Worl< is difficult to quantify. The Port of Houston has suffered at least $8,079,799 in quantifiable damages, but the total hmm to the Port of Houston is higher.

REQUESTS FOR PRODUCI'ION

GENERAL 0BJEGI'IONS TO R EQUESTS FOR PRODUCTION:

With respect to Zachry's Fourth Request for Production, the Port of Houston hereby objects as follows: ·

1. The Port of llouston objects to each and every request to the extent that such request would requjre infonnation protected or exempted from discovery by any applicable privilege or immunity. In all instances, the Port of Houston intends to preserve and claim, where applicable, th~ uttomey/clitmt privilege, the work product immunity, the common interest p1ivi!ege, the consulting expert p1ivilege, the executive session privilege pursuant to Sections 551.104 and 55 1.146, Texas Government Code, of the Texas Open Meetings Act, the maritime security privilege pursuant to 49 U.S.C. 114 and 49 C.F.R, pt. 1520, and any other privilege, immunity or other legal principle or rule that protects or exempts from disclosure documents or other information requested by the Plaintiff. The foregoi ng objection is referred throughout the below objections as "Privileged."

2. The Port of Houston objects to each and every request to U1e extent that it is vague ("Vague"), unduly burdensome ("Unduly Burdensome"), overly broad ("Overly Broad") or seeks to impose obligations or burdens on the Port of Houston beyond those imposed by the Texas Rules of Civil Procedure, including without limitation the Rules of Civil Procedure applicable to discovery of magnetic or electronic data (each of these objections, individually or collectively, "Beyond the Rules.")

3. The Pmt of 1-touston objects to the definition of ''Zachry" set forth in paragraph 2 of Plaintiff's Fourth Set nf Interrogatories and Fourth Request for Production to the Port of Huustun as Vague, because the term is defined in relevant patt as meaning "Zachry Constn1cUon Corporation", a name in fact used by more than one company that was involved on the Project: one is the Port of Houston's counter-party as named, defined and agreed upon in the Bayport Te1minal Complex Phase 1A Wharf & Dredging Contract; nt least one other is not. Furthennore, tJ1e P011 of Houston understands that the corret:l m1me of Plaintiff is now Zachry Industrial, Inc. lt appears that the entity formerly known as "Zachry Constn1ction Corporation" engaged in transactions such that it no longer perfonned the Work lmdcr the Phase lA Wbarf & Dredging Contract, without the prior knowledge of the Port of Houston and in breHch of the Contract. The P011 ofHouston objects to the definition of"Zachry" to the extent that it suggests that the Port of C'l Houston has a contract for the work under the Phase lA Wharf & Dredging Contract with any entity other than the entity that originally executed the Phase 1A Wharf & Dredging Contract as the "Contractor." The Port of Houston, by its use of the tenn "Zachry" in these objections, refers to the entity that is the "Contractor" under the Phase lA Wharf & Dredging Contract.

4. The Pott of Houston objects to the definition of "Wharf and Dredge Contract" or "Contract" and each and every request that includes the tenn "Wharf and Dredge Contract" or "Contract" to the extent that Zachry intends for the term "Wharf and Dredge Contract" or "Contract" to mean that the Bayport Terminal Complex Phase 1A Wharf and Dredging Contract includes a greater scope of work or authority or discretion for Zt~chry than, in tact, it does. For example, Zachry's definition states thnt the contract is for the "design, construction and z

procurement" of a wharf facility, but, in fact, the Phase lA Wharf and Dredging Contract is not a design bui1d contract or an engineer, procure and construct contracl as implied by the definition. Zachry's scope of work is set forth in the Phase IA Vv'harfand Dredging Contract and the Port of Houston will respond in accordance with the actual scope of the Phase 1A Wharf and Dredging Contract The foregoing objection is referred to below as "Contract."

5. The Port of Houston objects to the definition of "document" in paragraph 7 under the Definitions and Instructions heading of Plaint(ffs Fourth Set of Interrogatories and Fourth Request for Production to the extent that the definition (i) inaccurately characterizes or seeks to expand Tex. R. Civ. P. 192.3(b), (ii) could be construed to require the Port ofHouston to locate or produce doctm1ents no longer in its possession, custody, or control, (iii) would result in any obligation or burden that is Beyond the Rules, and (iv) calls for documents that can be obtained from some other source that is more convenient, less burdensome, or less expensive than demanding these documents from the Port of Houston.

G. The Port of Houston objects to the definition of "document" in paragraph 7 under the Definitions and Instructions heading of Plaintiff's Fourth Set of Interrogatories and Fourth Request for Production as Unreasonably Burdensome, duplicative, Vague and Beyond the Rules to the extent that the definition could be construed to require the Porl of Houston to produce both paper and electronic versions of the same identical document, notwithstanding use of the term "non-identical" in the definition.

7. The Port of Houston objects to the definition of "document" in paragraph 7 under the Definitions and Instructions heading of Plaintiff's Fourth Set of Interrogatories and Fourth Request for Production and the phruse "care, custody or control" as used therein to the extent- PlaintifT seeks to expand the scope of the Port of Houston's obligation to produce documents beyond Tex. R. Civ. P. 192.3(b) and 192.7(b) or thut is othen.vise Beyond the Rules.

8. The Port of Houston objects to paragraph ll under the Definitions and Instructions heading of Plaint(ff's Fourth Set of Interrogatories and Fourth Request for Production to the extent it seeks to require a privilege Jog that is Beyond the Rules or to reqtJirc the Port of Houston to provide a privilege log sooner than required by the Texas Rules of Civjl Procedure.

9. The Port of Houston objects to paragraph 12 under the Definitions and Instructions heading of Plaint!ffs Fourth Set of interrogatories and Fourth Request for Production to the extent it seeks to impose obligations upon the Port of Houston that are Beyond the Rules, C"'l including without limitation obligations in excess of those imposed by Tex. R. Civ. P. 196.4.

l 0. Tbe Port of Houston objects to paragraph 13 under the Definitions and Instmctions heading of Plaintiff's Fourth Set of Interrogatories and Fourth Request for Production to the extent it seeks to impose obligations upon the Port of Houston that are Beyond the Rules.

11. The Port of Houston objects to Zachry's Fourth Requests for Production as duplicative (''Duplicative").

12. The foregoing objections are hereby incorporated by reference into each other and into each individual response below. The foregoing objections and the objections lodged below should be construed as supplementing and not as conflicting with one another.

Subject to such general objections, the Po1t of Houston specifically objects and responds to each request as set forth below.

REouEsT No. 1:

All documents or communications concerning, relating, or regarding any hatm You contend that You have suffered as a result of Zachry's alleged misconduct in connection with its perfonnance of the Contract, including but not limited to all documents or communications regarding your contention that "[t]he Port Authority's harm includes, without limitation, additional program management consultant and engineering design fees, additional time spent and resources devoted by the Port Authority's engineering department, lost business, and Joss of use of construction materials ...[and] The Port Authority has also been banned by Zachry's advance cmise dredging, which was defectively performed pursuant to a change order to the Contract." This request includes, but is not limited to, any and all documents evidencing and quantifying each such alleged harm.

RESPONSE ANI) OBJECTIONS:

The Port of Houston objects to the request as discovery that \Vas propounded after lhe close of the discovery period of this case and without leave of Court having been requested or granted.

Subject to the foregoing objection, lhe Port of Houston incorporates the general objections stated above and specifically objects as follows: Privileged, Vague with respect to the term "suffered," Contract, and Duplicative.

Subject to the foregoing objections, the Port of Houston responds as follows: The Port of Houston has produced relevant, non-privileged, non-objected to responsive documents sought by this request. To the extent additional relevant, non-privileged, non-objected to responsive documents are located, the Port of Houston will produce them.

REoumH No. 2;

To the extent not previously produced, please produce any and all documents which constitute infrnmution requested by or relit:d upon to formulate or \vhich otherwise relate to your answers to Zachty 's Fourth Set ofInterrogatories, lnterrogato1y No. 1 above.

R ESI'ONSE ANO OBJECTIONS:

The Port of Houston objects to this request as discovery that was propounded atler the close of the discovery peliod of this case and without leave of Court having been requested or granted.

9

-o ·- :J

Subject to the foregoing objection, the Port of Houston incorporates the general objections stated above and specifically objects as follows: Unduly Burdensome, Overly Broad, and Unlimited Scope, in the sense tl1at the infonnation requestt:d is not limil~d to the period of time during the negotiation or performance of the Phase lA Wharf and Dredging Contract, Privileged, and Duplicative.

Subject to the foregoing objections, the Port of Houston responds as follows: The Port of Houston has produced relevan~ non-privileged, non-objected to responsive documents sought by this request. To the extent additional relevant, non-privileged, non-objected to responsive documents are located, the Port of Houston will produce them.

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CERTIFICATE OF SERVICE

I hereby certify that on this 241h day of July, 2009, a tlue and correct copy of the Port of Houston's Objections to Zacluy's Fourth Set of Interrogatories and Fourth Request for Production was served . on the following counsel tor Zachry Construction Corporation in accordance with the Texas R\tles of Civil Procedure.

Brandon T. Allen, Esq. Gibbs & Bruns, LLP I 100 Louisiana, Suite 5300 Houston, TX770~ ~

4059719v.4

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STATE OF TEXAS

COUNTY OF HARRIS

Before me the undersigned Notary Public, personally appeared Mark E. Vincent, who, being first duly sworn, did state that be is authorized to sign these Objectious and Responses to Zachry's Fourth Set of Interrogatories on behalf of the Port of Houston Authority, that he has read the foregoing answers to the Interrogatories and that the facts stated therein are based upon tlle information reasonably available to him or obtained from persons thought to be knowledgeable with respect thereto, and are true and correct to the best of his knowledge, information and belief.

Mark E. Vincent

Sworn to and subscribed before me this ~ay of July, 2009.

e ROSA L. VILlELA Notary Publ!o, Sll!IB of Taus ~ Commlaslon Expire• FEBRUARY 20 2012

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TAB 12

Defendant Port of Houston Authority’s Proposed Draft Jury Charge filed September 9, 2007 (CR43:12401-20)

Filed 09 September 17 A 11 :52 Loren Jackson - District Clerk Harris County ED101J015517175 By: Wanda Chambers CACSE NO. 2006-72970

ZACHRY CO);STRLCT!O); I"\" THE DISTRICT COCRT OF CORPORATIO'-:.

Plaintiff

v. HARRIS COl0:TY. TEXAS

THE PORT OF HOCSTO?\ AUTHORITY.

Defendant 151 ST JUDICIAL DISTRICT

DEFENDANT PORT OF HOUSTON AUTHORITY'S PROPOSED DRAFT JURY CHARGE

C0\1ES :\OW. Defendant THE PORT OF HOUSTO:\ AL.THOR!T'{ (the "Pon

Authority"). and files its preliminary proposed draft charge of the Court. A copy of the Port

Authority's preliminary draft charge is attached hereto. The Pon Authority e:\pressly reserves

the right to change. revise. add to. and:or delete instructions and/or questions as it may deem

appropriate. \lorecl\er. by submitting this preliminary draft charge. the Port Authl)rity i:; nQt

admitting that the attached questions and 1or instructions should be submitted to the jury and is

not admitting that there is any evidence to support the submission of the attached questions

and 1or instructions to the jury. The Pon Authority expressly reserves the right to assert any

objections and to make any requests (including. without limitation. no evidence objections) to

the charge submitted to the jury by the Court.

Respectfully submitted.

VI-:\SO~ & ELKI?\S L.L.P.

is! \Iarie R. '{ eates Of Counsel: .\larie R. Yeates .1. Clark :Vlartin Texas Bar No. 22150700 Texas Bar No. 13090000 Karen T. \\l1ite 1'-ELL Y HART & HALL\'lAN Texas Bar No. 20274500 1000 Louisiana. Suite 4 700 Bill Sims Houston. Texas 77002-6760 Texas Bar No. 18429500 Phone: 713.654.4600 Seth A. Russell Fax: 713 .52!.5925 Texas Bar No. 24027943 E-.\lail: clark. martin/a khh.com 2500 First City Tower 1001 Fannin St. Hougon.Texas77002 Phone: 713.758.2388 Fax: 713.615.5902 Email: k''hite avel:m .com bsims avdaw.com srussell avela\\ .com

Lawrence J. Fossi Texas Bar No. 07280650 Fossi & Je,vell LLP 4203 Yoakum Blvd .. Suite 100 Houston. Texas 77006 Phone: 713.529.4000 Fax: 713.529.4094 E-mail: lt<Jssi (i tc,ssiie\\ell.com

David H. Br0\\!1 Texas Bar No. 03109200 BRO\Vl\ & KORNEGAY LLP 2777 Allen Parkway. Suite 977 Houston. Texas 77019 Phone: 713.528.3703 Fax: 713.528.3701 Email: dbrown/a:bkllp.com

ATTORXEYS FOR DEFE?\DA\.'T THE PORT OF HOCSTON At'THOR!TY

CERTIFICATE OF SERVICE

I hereby certify that on this 17th day of September. 2009. a true and correct copy of the foregoing instrument was served on the following counsel for Zachry Construction Corporation in accordance \\ith the Texas Rules ofCivil Procedure.

Robin C. Gibbs Gibbs & Bruns. LLP I 100 Louisiana. Suite 5300 Houston. T:\ 77002

Karen T. White ;s/ Karen T. \\hite

PreliminarY Instructions

··The Contract'' means the Bayport Terminal Complex Phase 1A Wharf and Dredging Contract executed by The Port of Houston Authority and Zachry Construction Corporation on or about June 1. 2004, and includes all ··contract Documents .. as that term is defined ~ 1.10 of the General Conditions ofthe Contract.

"Zachry" means Zachry Construction Corporation. nO\\ known as Zachry Industrial Inc.

"Port" means The Port of Houston Authority

Question No. I

Did the Port fail to comply YVith the Contract in any of the follO\\ing respects by the October 11. 2005 response to Zachry's September 9. 2005 Frozen Soil Shoring Draft Cutoff Wall Design'?

In anS\\ering this Question. consider all ofthe provisions ofthe Contract.

Ans\ver "Yes .. or ··No .. as to each ofthe follO\\ing:

(a) Change Order 4

Answer: - - - - - - -

(b) ~ 5.10 ofthe General Conditions

AnS\\ er:

If your answer to Question No. l(a) or Question !(b) is .. Yes:· then answer the following the corresponding subparts ofthis Question. Otherwise. do not answer the following Question.

Question No.2

\Vas the Port's failure to comply excused?

Answer ··x'es" or ..:\o .. tor each ofthe following:

A. Conditions precedent

Failure to comply by the Port is excused by Zachry's previous failure. if any. to satisfy a condition precedent to its right to recovery pursuant to the agreement. "Condit ions precedent" are acts or events that are to occur after the contract is made and that must occur before there is a right to immediate performance and before there can be a breach of contractual duty.

(a) Ansvver "Yes.. or ""\o" as to the failure to comply. if any. that you found in Question !(a)

Answer: ______

(b) Answer "Yes" or .. ?\o" as to the tailure to comply. if any. that you tound in Question !(b)

Ansv\ er: - - - - - -

B. Waiver

Failure to comply by the Port is excused if compliance was vv aived by Zachry. Waiver is an intentional surrender of a known right or intentional conduct inconsistent \\ ith claiming the right.

(a) Answer .. Yes .. or ''l\o" as to the failure to comply. if any. that you found in Question ](a)

Answer: - - - - -

(b) Ansvver "Yes.. or ...:\o" as to the tailure to comply. if any. that you found in Question l(b)

Ansv\ er: - - - - -

C. Equitable estoppel

Failure to comply by the Port is excused if Zachry is equitably estopped. Equitable estoppel is established ifall ofthe tollO\\ing circumstances occurred:

1. Zachry

a. by words or conduct made a talse representation or concealed material facts.

b. with knowledge of the tacts or with knowledge or information that would lead a reasonable person to discover the facts, and

c. with the intention that the Port would rely on the t~dse representation or concealment in action or deciding not to act: and 1 The Port

a. d icl not know and had no means of knO\\ ing the t~1cts and

b. relied to its detriment on the t~1lse representation or concealment of material tacts.

(a) AnS\\er ··Yes .. or .. ~o .. as to the failure to comply. if any. that you tound in Question !(a)

AnS\Yer: - - - -

(b) Answer "Yes" or '':\o .. as to the failure to comply. if any. that you found in Question l(b)

:\nS\\ er: - - - - -

D. Quasi-estoppel

failure to comply by the Port is excused if Zachry acquiesced to the earlier situation: Zachry's present position is inconsistent with its earlier position \\hen it acquiesced to the situation: and it would be unconscionable to allO\\ Zacrhy to maintain its present position. which is to the Port's disadvantage.

(a) Ans\\er "Yes .. or ":\o .. as to the failure to comply. ifany. that you found in Question l(a)

AnS\Yer: _ _ _ __

(b) AnS\\er "Yes .. or ..'\o .. as to the failure to comply. if any. that you t\.1und in Question I( b)

Answe1..· - - - - -

E. Accord and satisfaction

Failure to comply by the Pon is excused if a different performance \vas accepted by Zachry as fi.lll satisfaction of pert\.1rmance of the original o bl igat ions of the agreement.

(a) Answer ··Yes" or ··Nci"· as to the failure to comply. if any. that you found in Question l(a)

AnS\\ er: - - - - - -

(b) Answer "Yes .. or ··No" as to the tailure to comply. if any. that you found in Question l(b)

Answer: - - - - - - -

F. Ratification

Failure to comply by the Port is excused if Zachry ratified the Port's tailure to comply. if any. Ratification is the adoption or cont1rmation by a person. \\ith kno\v·ledge of all material tacts. of a prior act. Ratification may be express or implied. Implied ratification occurs if a pan). though it may have been ummare of unauthorized conduct taken on its behalf at the time it occurred. retains the benefits of the transaction involving the unauthorized conduct after it acquired fi.tll knowledge of the unauthorized conduct. Implied ratification results in the ratification ofthe entire transaction.

(a) Ansv\ er "Yes" or ·'\' o.. as to the tai lure to comply. if any. that you t\)und in Quest ion 1(a)

Ansv\ er: - - -

(b) Ans\ver ··Yes" or "No" as to the failure to comply. ifany. that you found in Question ](b)

..:l.nswer: - - - - - -

G. Payment

Failure to comply by the Pon is excused if the Pon paid Zachry all of the amounts due and owed under the Contract.

(a) Answer "Yes" or "\'o" as to the tailure to comply. if any. that you found in Question l(a)

Answer: - - - - - -

(b) Ans\ver "Yes·· or "'\o .. as to the failure to comply. if any. that you found in Question !(b)

Ansvv er: - - - - -

H. Volunteer

Failure to comply by the Pon is excused if Zachry acted as a volunteer. voluntarily changing its position. not due to any force or other conduct by the Port.

(a) AnS\\er "'{es" or ·-"0:o" as to the failure to comply. if any. that you found in Question l(a)

Answer·. ______

(b) Answer "Yes" or "No" as to the tailure to comply. if any. that you tound in Question l(bl

Answer: - - - - - -

I. Release

Failure to comply by the Port is excused if Zachry released the claims asserted by it in this lawsuit against the Pon.

(a) Answer "Yes" or "No" as to the failure to comply. ifany. that you tc1und in Question l(a)

Answer: - - - - - -

(b) Answer "Yes" or ·'No" as to the failure to comply. if any. that you t:Ound in Question l(b)

AnS\\ et".______

J. Fraudulent inducement

Failure to comply by the Port is excused if Zachry fraudulently induced the Port to enter into the Change Order 4. Fraudulent inducement occurs \\·hen-

I. a party makes a material misrepresentation or a party tails to disclose a material fact within the knowledge ofthat part).

the misrepresentation is made with kmm ledge of its ta !sit) or made recklessly without <1!1) knO\\ ledge of the truth and as a positive assertion or the party knO\\S or the party knO\\S that the other party is ignorant of the tact and does not have an equal opponunity to discover the truth.

3. the misrepresentation is made with the intention that it should be acted on by the other party or the party intends to induce the other pmiy to take some action by tailing to disclose the tact. and

4. the other party suffers injur,y as a result of its reliance on the misrepresentation or as a result of acting without knowledge of the undisclosed tact.

.. Misrepresentation .. means a false statement offact: or a promise offi.nure pertormance made '' ith an intent. at the time the promise ''as made. not to perlorm as promised .

.A duty to disclose may arise when ( 1) a person \'Oiuntarily discloses par1ial information but fails to disclose the whole truth: (2) a person makes a representation but fails to disclose new information that makes the earlier representation misleading or untrue; or (3) a person makes a partial disclosure and con\'eys a talse impression.

(a) Ans\ver .. Yes .. or ..:\o .. as to the tailure to comply, ifany, that you found in Question l(a)

AnS\\ er: - - - - - - -

K. Prior material breach

failure to comply by the Port is excused by Zachry's pre\ious failure. if any. to comply \\ ith a material obligation of the Contract.

(a) AnS\\er .. Yes .. or ..'\o" as to the tailure to comply. if any. that you tound in Question ](a)

Answer: - - - -

(b) .Answer ..Yes .. or ··No .. as to the failure to comply. if any. that you tound in Question l(b)

Answer: - - - - -

If your answer to Question No. l(a) or Question l(b) is ·'Yes:· then answer the following Question. Otherwise, do not answer the to llmving Question.

Question :-\o. 3

With respect to the failure to comply. if any. found by you in Question ]{a) and/or Question l(b). did Zachry fail to give the required notice. if any. within five (5) days as set out in ~5.42 ofthe General Conditions ofthe Contract?

Answer ·'Yes.. or .."!\o·· tor each ofthe following:

(a) Change Order 4

AnS\\ er: - - - - - - -

(b) § 5. l 0 of the General Cone! it ions

Answer: - - - - - - -

If you answered Question No. l(a) or Question No. l(b) ·'Yes:· and answered ·'No" to every corresponding subpart ofQuestion "\Jo. 2. then answer the following Question. Otherwise do not answer the fo llovving question.

Question :\o. 4

What sum of money. if any. paid now in cash. would fairly and reasonably compensate Zachry for its damages. if any. that resulted fi·om such tailure to comply':

Consider the to llowing elements of damages. if any. and none other.

(I) the balance due and owed by the Port. if any. under the Contract. including any amount owed as compensation for increased cost to perform the \\Orl\ as a direct result of O\\ ner-caused de lays;

(:2)the amount 0\\ed. if any. f(_w change orders or additional \\Or!\ Zachr;. is directed to perform by the Port in connection with the Contract.

Do not add any amount for interest on damages. if an).

Do not include in your answer any amount that )OU find that Zachr) could have avoided by the exercise ofreasonable care.

Do not add any amounts for delay or hindrance damages. if an). unless you find that the delay or hindrance damages resulted solely from the Pon ·s fhlllcl. bad faith. arbitrary and capnc1ous conduct. or active interference. if any.

Fraud occurs when-

a party makes a material misrepresentation.

the misrepresentation is made with knowledge of its talsity.

the misrepresentation is made\\ ith the intention that it should be acted on by the other party. and

the other party relies on the misrepresentation and thereby sufters injury.

"I'vl isrepresentation" means a false statement 0 r tact.

Bad faith means conscious doing of a wrong for dishonest or malicious purpose.

In deciding whether delay or hindrance damages. if any. resulted solely fi·om the Port's bad faith. if any. do not consider evidence ofthe Port's attorneys· fees.

Arbitrary and capricious means willful and unreasoning action \Vithout due consideration and in disregard ofthe facts. circumstances. and the rights of other parties involved.

Active interference means affirmative. willful action. taken to unreasonably interfere \\ith the other party· s comp Iiance with the terms of the contract. Active interference does not mean a simple mistake. error in judgment. bck of total e1Tort. or lack of complete diligence.

A party does not unreasonably interfere by doing what that party had a right to do under the contract.

A party does not unreasonably intertere if the party takes action with an objectively well-grounded and justifiable good faith belief that the party had the right to engage in that action.

AnS\\ er separately in do !Iars and cents. if any. tor each element.

(a) the balance due and O\\ed by the Port. if any. to Zachry under the Contract. including an) amount owed as compensation to Zachry tor increased cost to pertorm the \\ ork as a direct result of owner-caused delays

(i) Sustained betore .lanuar> I. 2008:

Answcr:S- - - - - - -

(iiJ Sustained on or after January I. 2008:

AnS\\er:S- - - - - -

(b) the amount owed. if any. to Zachr) tor change orders or additional \\Ork Zachry is directed to perform by the Pon in connection '' ith the Contract.

(i) Sustained betore Januar) I. 2008:

Ans\Yer:S- - - - - - -

(iiJ Sustained on or after January I. 2008:

Answer:S- - - - - -

Ifyou anS\\ered with any amount in Question No. 4(a)(i). 4(a)(ii). 4(b)(i) and/or -1-(b)(ii). then answer the corresponding subpart in the tollowing Question. Otherwise. do not answer the following Question.

Question :\o. 5

\Vhat percentage of the damages. if any. t\.!und by you in Quest ion -:\ o. -1-( a)( i). -1-( a)( ii ).

..J.(b)(i) anctor -1-(b)(ii) above \\ere delay or hindrance damages?

AnS\\er each subpart below '' ith a percentage fl-om 0°/o to I 00%. Do not divide l 00°'o among the tour subparts below. but rather anS\\er each subpm1 separately by considering a percentage up to and including I 00% for each subpart. The sum of the answers to the four subparts below may not total more than 400%.

(a) the balance due and owed by the Port. if any. including any amount owed as compensation tor increased cost to pertorm the work as a direct result of owner-caused de lays

(il Sustained betore January I. 2008:

Answer: _ _ _ _ _ % as to delay or hindrance damages

( ii) Sustained on or after January 1. 2008:

Answer: _ _ _ _ _ ~/o as to delay or hindrance damages

(b) the amount owed. if any. tor change orders or additional work Zachry is directed to pert\xrfl by the Port in connection'' ith the Contract.

( i) Sustained before January I. 2008:

AnS\Yer: _ _ _ _ _ % as to delay or hindrance damages

(ii) Sustained on or after January 1. 2008:

Answer: _____ ~/o as to delay or hindrance damages

Question No. 6

Did the Port fail to comply with the Contract by withholding, fi·om amounts invoiced by Zachry. any of the tollcm ing'?

In answering this Question. consider all the provisions ofthe Contract.

Ans\\·er "Yes" or "1\o" for each ofthe tollo\ving:

(a) amounts withheld that the Pon labeled on the Estimates tor Contract Payment as 5600.000 offset

Answer: _ _ _ _ _ _ __

(b) amounts withheld that the Port labeled on the Estimates tor Contract Payment as "] iq u idated damages"

Ans\\ er: - - - - - - - - - -

If your answer to Question No. 6(a) and/or Question No. 6(b) is "Yes ... then answer the corresponding subpart of to !lowing Question. Othem ise. do not answer the fo !lowing Question.

Question :-Jo. 7

\Vas the Port's failure to comply excused'?

A. Conditions precedent

Failure to comply by the Port is excused by Zachry's previous failure. if any. to satisfy a condition precedent to its right to recovery pursuant to the agreement. ··c ond it ions precedent" are acts or events that are to occur after the contract is made and that must occur bef()re there is a right to immediate performance and bet(Jre there can be a breach of contractual duty.

(a) Answer "Yes" or ·":\o .. as to the ta i lure to comply. if any. that you I'Clund in Quest ion 6( b)

Answer: _ _ _ _ __

B. w·aiver

Failure to comply b) the Port is excused if compliance\\ as '' aived by Zachry. Waiver i~ an intent ion a I surrender of a known right or intent ion a I conduct inconsistent '' ith claiming the right.

(a) Answer "Yes" or "i\o" .. as to the failure to comply. if any. that you found in Question 6(a)

Ans\ver· _ _ __

(b) AnS\Yer "Yes" or ""\'o" as to the tailure to comply. if any. that you tound in Question 6(b)

Answer: _ _ _ _ __

C. Prior material breach

Failure to comply by the Port is excused by Zachry's pre\ ious tailure. if any. to comply \\ ith a material obligation of the Contract.

(a) Ans,,er "Yes" or ":-Ju" .. as to the failure to comply. if any. that you tc1und in Question 6(a)

Answer: - - - -

(b) A.J1S\\er "Yes" or ":-Jo" .. as to the failure to comply. if any. that you found in Question 6(b)

Answer: _ _ __

D. Release

Failure to comply by the Po11 is excused if Zachry released the claims asserted by it 111 this lawsuit against the Port.

(a) Ans\ver ..'{es .. or ..:-.:o·· ··as to the failure to comply. if any. that you found in Question 6(a)

Ans\Yer: - - - - -

(b) Answer .. Yes .. or ...'\o .. ··as to the tailure to comply. if any. that you tound in Question 6(b)

Answer: - - - - -

E. Payment

Failure to comply by the Port is excused if the Port paid Zachry all ofthe amounts due and owed under the Contract.

(a) AnS\\er .. Yes" or ··:\o .. as to the tailure to comply. if any. that you t"l1und in Question 6(a)

AnS\\er: - - - - - -

(b) Answer ··Yes .. or ..1\o .. as to the failure to comply. if any. that you touncl in Question 6(b)

Answer: - - - - -

:i 1

Ifyou ans\vered Question No. 6(a) and/or Question :-.:o. 6(b) ·'Yes:· and answered "-:\o" to any corresponding subpart of Question No. 7. then answer the corresponding part of the tollo\\·ing question. Otherwise do not anS\\er the foliO\ving question.

Question '\'o. 8

What sum of money. if any. paid no\v in cash. would t'i:tirly and reasonably compensate Zachry tor its damages. if any. that resulted fi·om such failure to comply?

Consider only the balance clue and owed by the Port, if any. under the Contract.

Do not add any amount tor interest on damages. if any.

Do not include in your answer any amount that you find that Zachry could have avo idee! by the exercise ofreasonable care.

Answer in dollars and cems. if any. lor each ofthe tollo,ving:

(a) amounts \Vithheld that the Port labeled on the Estimates tor Contract Payment as S600,000 offset

(b) amounts \\·ithhe ld that the Port Iabe led on the Estimates for Contract Payment as "liquidated damages"

Al1S\\ er:S ------------------

Question ~o. 9

What is a reasonable fee for the necessary services of the Port's attorneys. stated in do liars and cents?

Consider the following factors in determining the reasonableness of an attorney· s fees award:

<~> the time and labor involved. the novelty and difficulty ofthe questions involved.

and the skill required to perform the legal services properly:

<~> the likelihood that the acceptance of the particular employment \\ill preclude other employment by the la\vyer:

e the t'ee customarily charged in the locality tor similar legal services: <~> the amount involved and the results obtained: <~> the time limitations imposed by the client or the circumstances: <~> the nature and length of the professional relationship'' ith the client: <~> the experience. reputation. and ability of the lawyer or lawyers pertorming the services:

and <~> ''hether the tee is fixed or contingent on results obtained or uncertaint) of collection befbre the legal sen kes have been rendered.

Ans\ver \\ ith an amount\\ ith respect to each of the t\Jllo\\ ing:

(a) For preparation and trial with respect to the tailure to comply. if any. inquired about in Question :\o. 1

Answer: S- - - - - - -

(b) For preparation and trial with respect to the failure to comply. if any. inquired about in Question ~o. 6

Answer:

(c) For an appeal to the Coun ofA.ppeals V\ith respect to the failure to comply. ifany.

inquired about in Question \:o. I

AnS\\er: s_______ ( cl) For an appeal to the Court of Appeals '' ith respect to the failure to comply. if an).

inquired about in Question :\o. 6

Answer: S- - - - - - -

(e) For an appeal to the Supreme Court ofT exas \\ ith respect to the tailure to comply. if any.

inquired about in Question :\o. I

Answer: S

(f) For an appeal to the Supreme Court of Texas \\·ith respect to the failure to comply. if any.

inquired about in Question No.6

Answer: S- - - - - - -

TAB 13

Contract, General Conditions (DX1-1.0177-235)

\

~/I.I ( PORT OF HOUSTON AUTHORITY GENERAL CONDITIONS FOR CONSTRUCTION WORK ON PORT PROPERTY

TABLE OF CONTENTS

SECTION 1. DEFINITIONS OF TERMS

1.01 Addenda

1.02 Applicable Law

1.03 BldlProposal

1.04 BidfProposal Documents

1.05 Bonds

1.06 Change Orders

1.07 Chief Engineer

1.08 Concurrent Delay

1.09 Construction Change Directive

1.10 Contract Documents

1.11 Contract Price )

1.12 Contract TIme

1.13 Contractor

1.14 Design Consultant

1.15 Drawings .. 1.16 Environmental Laws

1.17 EqUIpment and Materials

1.18 Force Majeure

1.19 Governmental Authority

1.20 Hams County Auditor

1.21 Hazardous Substances

1.22 Inspectors

1.23 Insurance Certificates

1.24 Modlficatron

General Conditions • (Rev'd November 1, 2002) VIII· i . vii

OX 0001-1.0177

1.25 Own Forces

1.26 Port of Houston Authority

1.27 Port of Houston Authority Commission or Commission

1.28 Port Authority Indemnitees

1.29 Product Data

1.30 Project.

1.31 Purchase Orders

1.32 Purchasing Manager

1.33 Request for Information or RFI 1.34 Samples

1.35 Shop Drawings

1.36 Specifications

1.37 Standard of Care

1.38 Subcontractors

1.39 Submittals

1.40 Supplier )

1.41 Taxes

1.42 Work

SECTION 2. CONT~CT DOCUMENTS

2.01 Intent of Drawings ar:!d Specifications

• 2.02 Precedence of Contract Documents

2.03 Interpretation of Contract Documents

2.04 Reference Specifications

2.05 Special Conditions

2.06 Examination of Drawings, Specifications, Special Conditions and Site of Work

2.07 Subsurface Data and BidlProposal Quantities

2.08 Supporting Documents - Performance & Payment Bonds

2.09 Harris County Auditor's Approval

General Conditions (Rev'd November 1, 2002) VIII - jj - vii

OX 0001-1.0178

2.10 Pon of Houston Authority Purchase Order

SECTION 3. GENERAL PROVISIONS

3.01 Tax Exemption

3.02 Conflicts of Interest "-

3.03 Prevailing Wage Scale

3.04 Assignment of Antitrust Causes of Action

3.05 Small Business Development Program

3.06 Contractor's Insurance Requirements

3.07 Proof of Insurance By Contractor

3.08 Indemnification By Contractor

3.09 No Estoppel or Waiver

3.10 Recovery of Attorney's Fees

3.11 Contractor's Qualifications

3.12 Severability

3.13 Successors and Assigns

3.14 No Third Party Beneficiaries

3.15 Change of Control

3.16 Governing Law

SECTION 4. REGULATORY AND SAFETY REQ.UlREMENTS

4.01 Laws to be Observed .-

-

4.02 Code Regulations.

4.03 Permits and Licenses

4.04 Barncades, Warning lights and Warnmg Signs

4.05 Sanitary Facilities

4.06 Site Health and Safety Coordinator

4.07 Health and Safety

4.08 Accident Reportmg

4.09 Fill Material Polley

General Conditions (Rev'd November 1, 2002) VIII - iii - vii

OX 0001-1.0179

4.10 Spill Prevention Plan

4.11 Cultural Resources

4.12 Use of Explosives

4.13 Burning

4.14 Permit for Welding and Cutting

4.15 Interference with Port Operations and Navigation

4.16 Misplaced Materials

4.17 Work On or Around Port Authority Grain Elevators

4.18 Work On or Around Railroad Tracks

4.19 Discovery of Hazardous Substances

420 Disposal of Excavated Materials and Certain Other Waste

4.21 Characterization of Waste Materials

4.22 Environmental Management System

SECTION 5. PROSECUTION OF THE PROJECT

5.01 Commencement of Work

5.02 Start Date for Field Work

5.03 Planning of Work and Progress Schedule

5.04 Submittal of Updated Progress Schedule

5.05 Time of Completion and liquidated Damages

5.06 Actual Damages in Lieu of Liquid~ted Damages

5.07 No Delay Damages

5.08 Time Extensions

5.09 Lack of Satisfactory Progress

5.10 Independent Contractor

5.11 Subcontractors and Material Suppliers

5.12 Port as Third Party Beneficiary of Subcontra~ts

5.13 Port and Surety as Assignees of Subcontracts

5.14 Cooperation with the Port Authority and Others

General Conditions (Rev'd November 1, 2002) VIII - iv - vii

OX 0001-1.0180

~ ( ,:r/

5.15 lines and Grades

5.16 Contractor's Superintendent

5.17 Contractor's Local Office

5,18 Noltce

5.19 Character and ConduCt of Workmen

5,20 Drawings and Specifications Furnished by the Port Authority

5.21 Requests for Information

5.22 Submittals 10 be Furnished by the Contractor after Award

5.23 As-Built Drawings

5.24 Progress Photographs

5.25 Additional Schedules and Reports

5.26 Matenal Storage

5.27 Material Furnished by the Port Authority

5.26 Tools and Equipment Furnished by the Contractor

5.29 Water for Construction )

5.30 Electrical Connections

5.31 Contractor's Field Office

5.32 Field Office for Port Authority Personnel

5.33 Contractor's Obhgation to Maintain a Clean Work Site "

5.34 Material Testing ., -

5.35 Inspection Required at Stages of Work.

5.36 Discovery of Latent Defective Work.

5.37 T est Cuts by the Port Authority

5.38 Costs of Inspections by the Port Authority

5.39 Inspection Outside of Working Day

5.40 Substandard Material or Workmanship " .

5.41 Changes or Modifications

5.42 Claims for Changed Conditions or Contract Interpretations

General Conditions (Rev'd November 1. 2002) VIII- v - vii

OX 0001-1.0181

5.43 Calculations of Costs of Changes or Modifications ') ;

5.44 Limitations on the Costs of Changes or Modifications

5.45 Intellectual Property Rights

5.46 Partial Utilization by the Port Authority

5.47 Termination for Convenience of the Port of Houston Authority

5.48 Termination for Cause

5.49 Right of Port Authority to Suspend the Work

5.50 Right of Port AuthOrity to Accelerate Work

5.51 Protection against Claims of Subcontractors, Laborers, Materialmen and Furnishers of Machinery, Equipment and Supplies

5.52 AlIegatioM of Change or Waiver of Contract Terms

5.53 Warranty

5.54 Progress Meetings

5.55 Dispute Resolution. Subrnfssion to Jurisdiction, Waiver of Right to Remove and Venue

SECTION 6. PAYMENT

6.01 Schedule of Costs )

6.02 Progress Payments

6.03 Inspector's Approval of Billings

6.04 Nonpayment for Unincorporated Material

6.05 Right to'Withhold

6.06 . Overp~yment for Defective or Over Estimated Work

6.07 Contractor's Submittal of Affidavit

6.08 Supporting Documents for Progress Payments

6.09 Final Inspection by the Contractor

6.10 Final Inspection by the Port Authority

6.11 A Finding of Incomplete Work

6.12 Conditions to Final Payment

6.13 Payment and Retainage

General Conditions (Rev'd November 1, 2002) VIII - vi - vii

OX 0001-1.0182

,.J \y 6.14 Title to Work

615 Payment Not Waiver or Acceptance of Work

6.16 Right to Audit

6.17 Offset

-.

General Conditions • (Rev'd November 1, 2002) VIII - vii - vii

OX 0001-1.0183

1/ GENERAL CONOmONS FOR CONSTRUCTION WORK ON PORT AUTHORITY PROPERTY

SECTION 1. DEFINITIONS OF TERMS

Whenever in these General Conditions and in the other Contract Documents, the following terms are used. the intent and meaning shall be interpreted as set out below.

1.01 Addenda:

Documents issued by the Port Authority after the initial BidfProposal Documents have been issued to bidders/proposers and prior to the acceptance of bids/proposals, which documents are part of the BidlProposal Documents.

1.02 Applicable Law:

Any and all federal, state and local statutes, laws, rules, regulations, ordinances, codes and rules of common law pertaining to the Contractor's services, the site, the Contractor's employees and Subcontractor's employees and/or the Work, including, without limitation (i) Environmental Laws, (ii) those pertaining to equal opportunity, affirmative action and discrimination, and (iii) those pertaining to health or safety, including without limitation, the Occupational Safety and Health Act of 1970 (84 U.S. Statutes 1590) as amended and any applicable state programs, rules and regulations approved or provided thereunder.

1.03 Bid/Proposal:

The Contractor's bid/proposal submitted in connection with the Work, as such bid/proposal may be modified and agreed to or ordered by the Port. -

1.04 Bid/Proposal Documents:

Those documents issued by the Port Authority soliciting bids/proposals, as applicable, including any Addenda and the documents submitted by the Contractor which comprise the Contractor's BidJProposal.

1.05 Bonds:

The performance and payment bonds that the Contractor is required to furnish to the Port pursuant to Section 2.08. -

1.06 Change Orders:

A modification of or change to the Contract Documents agreed to and executed by the Port Authority and Contractor after Contract execution and in accordance with the Contract Documents to revise, add to, or delete from the Work or to adjust the Contract Price or Contract Time .

1.07 Chief Engineer.

The Chief Engineer is an employee of the Port of Houston Authority. The only person in the Port of Houston Authonty Engineering Department with authority to resolve engineering questions or problems, agree to modifications or changes, and to - re'Sollie' olsputes Involving Contracts or Bid/Proposals Originating from the Port of Houston AuthOrity Engineering Department, where the Port of Houston Authority is specrflcally gillen such authority in this Contract, IS the Chief Engineer. No other

General Conditions (Rev'd November 1, 2002) VIII - 1 - 52

OX 0001-1.0184

employee of the Port of Houston Authority Engineering Department has such authority. Any such resolutions must be in writing and signed by the Chief Engineer. . '.

1.08 Concurrent Delay:

Delays caused in whole or in part. or contributed to by any primary. concurrent or contributorily negligent acts or omissions by the Contractor. its Subcontractors or Suppliers. or which arise from any other failures by Contractor or its Subcontractors or Suppliers to perform their respective obligations in accordance with the Contract Documents. This limitation shall apply EVEN IF THE PORT AUTHORITY OR ANY OF THE PORT AUTHORITY"S OTHER CONTRACTORS OR ANY OTHER PERSONS OR ENTITIES FOR WHOM THE PORT AUTHORITY IS RESPONSIBLE ARE CONCURRENTLY OR CONTRIBUTORILY NEGl:IGENT WITH RESPECT TO ITS OR THEIR OWN ACTS OR OMISSIONS.

1.09 Construction Change Directive:

A document issued by the Chief Engineer directing the Con,tractor to make a minor change in the Work, which change shall not require any modification of the Contr~ct Price.

1.10 Contract Documents:

The Contract Documents are composed of the Contract agreement signed by the Port Authority and Contractor. Addenda (if any), Contractor's Bid/Proposal (including documentation accompanying the BidJProposal and any post-Bid/Proposal documentation submitted and agreed to by the Port Authority prior to commencement of Work}. the Bonds. Insurance CertifICates. these" General Conditions. Special Conditions. Specifications and Drawings. the Purchase Order. and Modifications. The Contrad Documents form the Contract. This Contract represents the entire and integrated agreement between, the parties hereto and supersedes aI/ prior negotiations, representations or agreements, either written or oral. The Contract Documents shall not be construed to create any contractual relationship of any kind between the Port Authority and any Subcontractor or Supplier or between any persons or entities other than the Port Authority and Contractor.

1.11 Contract Price:

The amount set forth in the Contract agreement, as such amount may be modified by Change Order. which the Contractor is entitled to receive for full and complete performance of the Work in accordance with the Contract Documents.

1.12 Contract Time:

The time period set forth in the Contract for the Contractor to finally complete the Work. The Contract Time may be expressed in number of calendar days or number of working days or by reference to the date of completion. If the Contract Time is measured by calendar days. each and every calendar day shall be counted against the Contract Time. If the Contract Time is measured by working days, Saturdays, Sundays. AG.C. holidays and approved time extensions shall not be counted against the Contract Time.

1.13 Contractor.

Contractor means the independent contractor which is. named in the Contract agreement and is responsible for the construction of the Work. The Contractor is an independent contractor and not an employee or agent of the Port Authority. • .'.. .' .

General Conditions (Rev'd November 1. 2002) VIII- 2 - 52

OX 0001-1.0185

1.14 Design Consultant:

Design Consul1ant means an independent architect or engineer with responsibility for design of the Work. The Design Consultant is an independent contractor and not an employee or agent of the Port AuthOrity.

1.15 Drawings:

The graphic and pictorial portions of the Contract Documents showing the design. location and dimensions of the WOrk. which Contrad Documents may indude without limitation elevations, sections. details. schedules or diagrams.

1.16 Environmental Laws:

Any and all applicable federal, state or local statutes, laws, rules, regulations, ordinances, codes and rules of common law now in effect (including any amendments now in effect) and any current judicial or administrative interpretation thereof, including any judicial or adll,linistrative order, consent decree, or judgment. relating to the environment, Hazardous Substances or exposure to Hazardous Substances, including without limitation the Comprehensive Environmental Response, Compensation and Liability Act of 1980, 42 U.S.C. §§ 9601, et seq.; The Hazardous Materials Transportation Act. 49 U.S.C. §§ 1801. et seq.; The Resource Conservation and Recovery Act of 1976, 42 U.S.C. §§ 6901, et seq.; the Federal Water Pollution Control Act. 33 U.S.C. §§ 1201, et seq.; the Toxic Substances Control Act. 15 U.S.C. §§ 2601, et seq.: the Clean Air Act. 42 U.S.C. §§ 7401, et seq.; the Safe Drinking Water Act, 42 U.S.C. §§ 3808, et seq.

1.17 Equipment and Materials:

The equipment and materials to be supplied by the Contractor, its Subcontractors and Suppliers and to be incorporated into or otherwise used in connection with the Work

.... f 1.18 Force Majeure:

Fire, flood, act of God, earthquakes, epidemic, war, riot, civil disturbance, sabotage, terrorism or - judicial restraint, but only to the extent such event (i) is beyond the control of and cannot be reasonably anticipated by or the effects alleviated by the Contractor and (ii) prevents the performance of the Work. Events not specifically listed herein shall not constitute events of Force Majeure. By way of example only, weather which is not abnprmat, even if such weather Could not be reasonably anticipated and even if such weather prevents the performance of the Work, shall not be an event of Force Majeure.

1.19 Govemmental Authority:

Governmental Authority means (a) the United States of America or any foreign country, (b) any state. county. municipality or other governmental subdivision within the United States of America or any foreign country, and (el any court or any governmental department, commiSSIon, board, bureau, agency or other instrumentality of the United States of America or any foreign country, or of any ·state. county, municipality or other govemmental subdivision within the United States of America or any foreign country.

1.20 Harris County Auditor:

The auditing official of Harris County.

,,_, • r

General Conditions (Rev'd November 1,2002) Vllt - 3 - 52

OX 0001-1.0186

1.21 Hazardous Substances:

~)

(i) Any hazardous materials, hazardous wastes, hazardous substances, solid waste and toxic substances as those or simdar terms are defined under any Environmental Laws;

(ii) Any asbestos or any material which contains any hydrated mineral silicate, including chrysolite, amosite. crocidolite, tremolite, anthophylite andlor actinolite, whether friable or non-friable;

(iii) Any poIychlorinated-biphenyis (-PCBs·), or PCB-containing materials, or fluids;

(iv) Radon;

(v) Any other hazardous, radioactive, toxic or noxious substance, material, pollutant, or solid, liquid or gaseous waste;

(vi) Any pollutant or contaminant (including petroleum, petroleum hydrocarbons, petroleum products, crude oil or any fractions thereof, any oil or gas exploration or production waste, any natural gas, synthetic gas or any mixture thereof) which in its condition, Concentration or area of release could have a significant effect on human health, the environment, or natural resources;

(vii) Any substance that, whether by its nature or its use, is subject to regulation under any Environmental Law or with respect to which any Environmental Law or Governmental Authority requires environmental investigation, monitoring or remediation; and

(viii) Any underground storage tanks, as defined in 42 U.S.C. Section a99-1(1)(A)(I) (including those defined by Section 9001(1) of the 1984 Hazardous and Solid Waste AmendmenIs Ie the Resource Conservation and Recovery Act. 42 U.S.C. Section 6901 et seq.; the Texas Water Code Annotated Section 26.344; and Title 30 of the Texas Administrative Code Sections 334.3 and 334.4}, whether empty, filled or partially filled with any substance.

1.22 Inspectors:

The individuals assigned 'by the Chief Engineer (which individuals may be third party contractors)

to make detailed inspections of any or all portions of the Work and materials or equipment involved in the Contract are the Inspectors. Inspectors tlave no aulhority to change any of the terms and conditions of the Contract. This authority is reserved for1he Chief.~gineer alone.

1.23 Insurance Certificates:

The insurance certificates that the Contractor is required to furnish to the Port pursuant to the Contract Documents. .

1.24 Modification:

A ModifICation is (1) a written amendment to the Contract Signed by both the-Contractor and the Port, (2) a Change Order, (3) a Construction Change Directive, or (4) a written interpretation of the Contract Documents issued by the Chief Engineer.

1.25 Own Forces:

Actual field labor performed at the site by employees of the Contractor under the immediate supervision of Contractor's field superintendent. By way of example only, the follOWing is not War!< performed by Contractor's Own Forces:

General Conditions (Rev'd November 1,2002) VIII- 4- 52

OX 0001-1.0187

~ a. Work performed by Subcontractors or contract laborers; or

b. Work performed in the Contractor's office or anywhere other than in the field at the site, even if performed by the Contractor's employees.

1.26 Port of Houston Authority:

The Port of Houston Authority of Harris County. Texas is a political subdivision of the State of Texas and a body politic. The terms Port of Houston Authority. Port Authority. Port of Houston. PHA and Port are synonymous with the Port of Houston Authority of Harris County, Texas. The Port is independent and not a part of the government of Harris County. Texas or the City of Houston.

1.27 Port of Houston Authority Commission or Commission:

The Port of Houston AuthOrity is governed by the Commission which meets monthly and is comprised of a chairman and six commissioners. The Commission is ,the ultimate governing authority of all Port of Houston operations. The Contractor is hereby advised that approval by the Commission is required for certain matters.

1.28 Port Authority Ir~demnitees:

The Port of Houston Authority and its Commissioners. directors. officers. agents and employees.

1.29 Product Data:

Manufacturers' standard schematic drawings. catalog sheets, brochures. diagrams. schedules.

performance charts. illustrations, Material Safety Data Sheets (MSDS) or any other descriptive items.

) 1.30 Project: ,/

The total Port construction project of which the Work performed under the Contract Documents may ~ the whole or a part and which may iJ'!CIude alnStnJction by the Port Authority or by separate contractors.

1.31 Purchase Orders:

A written and fu!ly-~ecuted purchase order covering the WorK and issued to the Contractor in accordance with the Contract Documents.

1.32 Purchasin, Manager:

The purchasing manager of the Port of Houston Authority.

1.33 Request for Information or RFI:

A written request from the Contractor to the Chier Engineer requesting information in respect of or an interpretation of a requirement or provision of the Contract Documents. Neither an RFI nor a response to an RFI is a Contract Document.

1.34 Samples:

Physical examples which illustrate Materials. EqUipment or workmanship and establish standards by which the Work will be judged.

General Conditions (Rev'd November 1, 2002) VIII· 5 - 52

OX 0001-1.0188

1.35 Shop Drawings:

Drawings, diagrams, schedules and other data specially provided for the Work. by the Contractor, its Subcontractors or Suppliers to illustrate how certain specific Work components fit together and will be located in relation to each other.

1.36 Specifications:

The SpecifICations are that portion of the Contract Documents consisting of the written requirements for Materials, Equipment, construction systems, standards and workmanship for the Work and performance of related services. Specifications may be separate or set forth on the Drawings, or both.

1.37 Standard of Care:

The requirement that the Contractor shall supervise and direct the Work., using the Contractor's best skill and attention, in a good and workmanlike manner and in the best and most expeditious and economical manner consistent with the interests of the Port Authority, shall exercise the degree of care, skill and diligence in the performance of the Work in accordanCe with and consistent with industry standards for similar circumstances, shall utilize its best skill, efforts and judgment in furthering the interests of Port Authority, and shall fumish efficient business administration and supervision.

1,38 Subcontractors:

Any person having a direct or indirect contract with the Conlractor, at any tier, for design or engineering, or for the supply and erection of Equipment or Materials, or for the performance of a portion of the Work. in each case forming part of the Work. No Subcontractor shall have any beneficial interest in or be a third party beneficiary to any Port Authority contrad (including without limitation this Contrad).

1.39 Submittals:

Shop Drawings, Product Data. Samples and other information provided by the Contractor for approval of proposed Equipment, Materials. means or methods. Submittals are not Contract Documents.

- 1.40 Supplier:

A person having a direct or indirect contract with the Contractor, at any tier, only for the supply of Equipment or Materials forming part of the Work. .

1.41 ~:

All taxes, duties. fees or other charges levied or imposed by any country, state or any political subdivision thereof. includIng but not limited to income, capital. sales, excise and use taxes, customs duties, stamp duties, fees or charges. levies in respect of social welfare. health, workers' compensation, ,pension, unemployment or other similar insurances or programs, whether imposed by withholdings or otherwise, and except as otherwise expressly provided, whether existing at the date -of ffiis Contract or created and imposed at a later date.

. ,',

General Conditions (Rev'd November 1,2002) VIII· 6 - 52

/

OX 0001-1.0189

1.42 lY2!!:

The construction and services required by the Contract Documents, whether commenced or not, or completed or partially completed, and all labor, Materials, Equipment and services provided or to be provided by the Contractor to fulfill the Contractor's obligations pursuant to the Contract Documents. The Work may constitute the whole or a part of the Project.

END OF GENERAL CONDITIONS SECTION 1

General Conditions (Rev'd November 1,2002) VIII-7-52

OX 0001-1.0190

~ SECTION 2. CONTRACT DOCUMENTS

2.01 Intent of Drawinas and Soecifications:

The intent of the Contract Documents is to include all items necessary for the proper execution and completion of the Work. These General Conditions, in conjunction with the other Contract Documents, all of which constitute a part of this Contract, are each intended to be cooperative; a provision occurring in one is as binding as though occurring in all, and when read together are intended to describe and provide for a finishett piece of work, complete in every detail. Work not covered in the Contract Documents will be required to the extent it is consistent therewith and is reasonably inferable therefrom as being necessary to produce the intended results consistent with the scope of Work as expressed in the Contracf Documents. The organization of the specifications into divisions, sections and articles, and the arrangement of the Drawings shall not control the Contractor in dividing llie Work among Subcontractors or in establishing the extent of Work to be performed by any trade. Unless otherwise stated or defined in the Contract Documents, words that have well-known technical or construction industry meanings are used in the Contract Documents in accordance with such recognized meanings.

2.02 Precedence of Contract Documents:

(a) If there is an irreconcilable conflict between Contract Documents, the document highest in precedence shall control, but except in such event and to avoid such conflict, every construction of provisions shall be that each is in aid to, or supplementary to or complementary of, each other provision, to control and secure for the Port Authority the completion of the entire Work in an expeditious, orderly and coordinated manner. The precedence, from highest to lowest, shall be in 1he following order:

1. Permits for the Work from Governmental Authorities as may be required by law;

2. Special Conditions;

3. General Conditions;

4. Specifications;

5. Drawings.

Change Orders and approved revisions to Drawings or other Contract Documents shall take precedence over ltems"2 through 5 above. Detailed Drawings shall take precedence over general Drawings.

(b) Should there be <;In irreconcilable conflict of terms within the Drawings or within the Specifications, the Contractor shall be obligated to provide the most e)(pensive combination of quality and quantity of Work indicated. The Chief Engineer win clarify the Project requirements in the event of an above mentioned conflict that affects the Contractor. In general,

1. figures take precedence over scale measurements;

2. large scale details take precedence over smaller scale details;

3. architectural Drawings take precedence in regard to dimensions, when in conflict with mechanical and structural Drawings, except f9f th.e,size of the structural members;

4. specifically titled Drawings and sections of the Specifications take precedence over indication of the item in a collateral way;

General Conditions (Rev'd November 1, 2002) VIII- 8 - 52

OX 0001-1.0191

5. existing conditions take precedence over Drawings and Specifications for dimensions_

2.03 Interpretation of Contract Documents:

The Port Authority and Contractor recognize the possibility that errors, omissions and discrepancies exist in the Contract Documents. Before starting each portion of the Work. the Contractor shall carefully study and compare the various Drawings and other Contract Documents relating to that portion of the Work. as well as the information furnished by the Port Authority, shall take field measurements of any existing conditions related to that portion of the Work and shall observe any conditions at the site affecting such Work_ Any errors, omissions or inconsistencies discovered by the Contractor shall be reported promptly to the Port Authority as an RFI in such form as the Port Authority may require.

Any such problem in the Contract Documents not brought to the attention of the Chief Engineer prior to Contractor's submission of its BidlProposal will be resolved by the Chief Engineer in a manner solely within the discretion of the Chief Engineer. Any such resolution shall not give rise to any claim for additional compensation or claim for damages by the Contractor.

In the execution of the Work. the Drawings shall be accurately followed to scale giving preference in all cases to figured dimensions over scale measurements and to details over general Drawings. Where any discrepancy occurs between figured dimensions and scale or between details and genera! Drawings, the Contractor shall provide notice of such discrepancy in an RFI. which RFI shall set forth the facts constituting such discrepancy in a degree of detail acceptable to the Port. to the Inspector who shall provide explanation and instructions as to which is to govern before the Contractor proceeds with.the Work at issue_ In the event there is a Design Consultant for the Project, the Contractor shall send the RFI to the Design Consultant. with a copy of the transmittal letter to the Inspector and the Chief Engineer. Departure from the Contract Documents in the execution of the Wor1c without the Chief Engineer's prior written order or consent will be at the Contractor's sale risk and expense and the Contractor will be responsible for all costs attributable thereto. including without limitation all costs associated with design ) professionals. and liable for all damages caused thereby. "

The Contractor shall not take advantage of any error or omission in the Contract Documents.

Instructions suitable to the Chief Engineer will be given by the Chief Engineer to the Contractor when such error or omission is discovered by the Chief Engineer or when reasonably requested of the Chief Engineer by the Contractor. At all times, the Contractor shall retain the duty- to detect or discover any errors and omissions and make appropriate request in respect thereof. If the Contractor performs any Work when it knew or shol!Sid have known it involves an error. inconsistency or omission in the Contract Documents without submitting such request to the Port Authority and receiving a written order or consent to proceed, the C9n~~Qr shall be responsible for'all costs attributable to such performance, including without limitation all cos&. assoc!.~ted with design profeSSionals, and liable for ~II damages caused thereby.

All Materials to be incorporated in the finished Work shall be new, of the highest quality and of the best grade of standard manufacture. When more than one Material, brand or process is specified for a particular item of Work, the choice shall be the Contractor's. The final selection of color and- pattem shall be made from the range available within the choice selected by the Contractor, unless the item is specified to match a specifIC color or sample fumished. Where Materials or Equipment are specified by brand name, trade name, or manufacturer, only products of those named manufacturers are acceptable unless equal Materials or -Equipment of. other manufacturers are approved in writing by the Chief Engineer ~ submittal of Bids/Proposals. The Contractor shall not be allowed to ~lIPply equal or alternative Materials or Equipment.not so approved. The judgment of the equality af"M-aterials, Equipment or products rests _solely with the Chief Engineer, and its decision shall be final. Specified architectural, construction or equipment details may not be regularly included as part of the named manufacturer's standard items or Equipment, but shall be provided by the manufacturer as required for the Project or the proper functioning of

General Conditions (Rev'd November 1, 2002) VIII- 9 - 52

OX 0001-1.0192

the Equipment.' Indicated and specified performance and Mater1aI' requirements are minimum, and are required in addition to standard performance and accessories provided by the manufacturer:

2.04 Reference Specifications:

(a) The following codes, standards, pamphlets and specifications are hereby incorporated into this Contract by reference as if each were set forth in full herein. except to the extent otherwise set forth in Section 2.04{bl.

AAMA Architectural Aluminum Manufacturers Association. AAN American AsSociation of Nurserymen. AAR Association of American Railroads. AASHTO American Association of State Highway and Transportation Officials.

ACI American Concrete Institute AFBMA Anti-Friction Bearing Manufacturers Association, Inc. AGe Associated General Contractors of America. AlA American Institute of Architects. h

AISC American Institute of Sleel Construction. AISI American Iron and Sleellnstitute. ANSI American National Standards Institute.

" API American Petroleum Institute.

AREA American Railway Engineering Association. ASCE American Society of eM! Engineers. ASHRAE American Society of Heating, Refrigeration and Air Conditioning Engineers.

ASME American Society of Mechanical Engineers. ASTM American Society for Testing and Materials. AWWA American Water Works AsSOciation. AWS American Welding Society. CI Gast Iron Pipe Insti1ute. CS Commercial Standards. FS Federal SP,eCiflC3tions. IEEE Institute of Electrical and Electronic Engineers. ISA Instrument Society of America. MBMA Metal Building Manufacturerll Association. NBS -National Bureau of Standards.' NEC National Ele,gtrical Code. NEMA, _ National Electrical Manufacturers Association . NFPA . Nationa.! Fire Protection Association. NBFU National Board of Fire Underwriters. OSHA Occupational Safety and Health Administration. SAE Society of Automotive Engineers. SSPC Steel Structures Painting CounciL TxDOT Texas Department ofTransportation. Ul Underwriters laboratories.

Tnese and all other specifications of trade associations, technical societieS. or of manufacturers, refer 10 the latest edition of each which is effective on the date.of "Invitation to BIdders" or on the date of ·'nvitation to Proposers: Manufacturers' specifications ard recommendations shall be cor:tstrued to mean those printed on container labels or in published mamlals,'6atalogues, or instruction sheets.

(b) The codes, standards, pamphlets, specifications and recommendations set forth above shall not apply to the extent:

General, Conditions (Rev'd November 1,2002) VIII- 10 - 52

OX 0001-1.0193

",)

1. that they provide requirements less stringent than those set forth in the Contract Documents, the requirements of which apply as minimums only. For the avoidance of doubt, such codes, standards, pamphlets, specifications and recommendations do not supersede more stringent requirements set forth in the Contract Documents;

2. that they include exclusions, limitations or waivers that are inconsistent with the Contract Documents.

2.()S Special Conditions:

Should any construction, work or condition which is not covered by these General Conditions be anticipated on any proposed WorK, Special Conditions for such Work wDi be attached to and shall be a part of the Contract.

2.06 Examination of Drawings, Specifications, Special Conditions and Site of Work:

In entering into the Contract. the Contractor represents and warrants that it has and shall be deemed to have carefully examined and inspected the site and its surroundings and satisfied itself as to the condition of all circumstances affecting the site and the Work., including without limitation the location and nature of the Work, nature of the geotechnical conditions, ground and subsoil, the form and nature of the site, the subsurface conditions of the site (both man made and natural), the location and character of existing or adjacent work or structures, the Contract Documents, the extent and nature of the Work and Materials necessary for carrying out and completing the Work., the ·general character and accessibility of the site, Applicable Law (including without limitation labor laws), any accommodations the Contractor may require, other general and local conditions which might affect the Work or performance of the Work, and in general all risks and contingencies influencing or affecting the Work, and, subject to the right set forth below to rely upon specified Port Authority supplied information, that the Contractor has assumed the risk of such conditions and will, regardless of such conditions, the expense, or difficulty of performing the ) Work, fully complete the Work for the stated Contract Price without further recourse to the Port Authority.

The Contractor fully accepts any lack of completeness of the Contract Documents, including the Drawings and Specifications, and verifieS that such documents were suffiCiently detailed and Comprehensive to enable Contractor to have reliably estimated and established the Contract Price and to perform the Work within the Contract Time.

The Contractor shaD not be entitled to any extensions of the Contract Time or to any adjustment of the Contract Price on grounds that .!t misinterpreted or misunderstood any matter assumed by the Contractor pursuant to this Section 2.06, nor shalt it be released from any of the risks accepted or obligations undertaken -by-it under the Contract Documents, or on the grounds that it did not or could not reasonably have foreseen any matter which affects the execution of the Work.. .

The Port Authority makes no representation or warranty, and hereby disclaims any such warranty, that any information provided to the Contractor by or on behalf of the Port Authority in connection with the Work is accurate, correct, complete, fit for its intended purpose or can be used without infringing any patent, copyright, trademark, trade secret or other intellectual property rights of third parties under any intellectual property rights of the world.

Notwithstanding the foregoing. in instances in which tRe Port Authority has supplied the Contractor with geotechnical reports or in which the Specia! Conditions specify that the Contractor is entitled to rely upon other infonnation provided by the Porr Auttioniy: the Contractor is entitled to rely upon such information in submittIng its bid and performing the Work except to the extent that the Contractor knows or should know in the exercise of ils Standard of Care that such information is inadequate, Insufficient or incorrect.

General Conditions (Rev'd November 1, 2002) VIII· 11 - 52

OX 0001-1.0194

2.07 Subsurface Data and Bid/Proposal Quantities:

The quantities shown on the Specifications and other Bid/Proposal Documents are estimates and are for comparison of Bids/Proposals only, and while such quantities are believed to be reasonably accurate, the Port Authority does not guarantee their accuracy.

The Contractor must make its own lake-off and base its price or prices on the results thereof. No Change Order shall be issued on account of any excess or deficiency with respect 10 such information whether absolute or relative in relation to quantities stated in the Specification or other BidJProposal Documents.

Without limiting the foregoing, any information given in regard to soil data, subsurface data, test borings, and similar conditions is to be considered approximate.

2.08 Supporting Documents - Performance & Payment Bonds:

Unless otherwise provided in the Special Conditions, each Contract at its inception shall be covered by a performance bond and a payment bond, each for 100% of the value of the Contract Bonds must be furnished with the executed Contract The cost of such bonds shall be bome by the Contractor and shall be prorated over an units of the Work. No lump sum payment will be made for such costs by the Port Authority. Front end loading to recover such costs will not be allowed. Such bonds must be furnished on the Port Authority forms. No other forms are acceptable. Such bonds must remain in full force for one year after final acceptance of the completed WOt1<. and cover aJI obr.gations: of the Cdntractor . during such one year period, specifICally including all warranty obligations of the Contractor. Performance and payment bonds must meet a\l criteria of Texas law and both must be executed by the same corporate surety which shall be (i) duly authorized and admitted to do business in the State of Texas, (ii) licensed by the State of Texas to issue surety bonds and (iii) listed in the current issue of the Federal Register Department of the Treasury list. Moreover. such surety must show adequate bonding capacity for the .,, size of the proposed Project. The Port AUthority will not accept bonds from surplus lines or Texas Uoyds Plan insurance companies. The Port Authority shall be the sale judge of the validity and adequacy of any bonds submitted.

2.09 Harris County Auditor's Approval:

No Contract shall become effective or bindmg .upon the Port of Houston Authority until the Harris County Auditor, the appropnate financial officer for the Port Authority, certifieS that funds are or will be available to meet the Contract pay requirements when due.

2.10 Port of Houston Authority Purchase Order:

The PurchaSing Manager shall prepare a Purchase Order on the form prescribed by the Port and mail or otherwise deliver the same along with one fully eKecuted copy of all other Contract Documents to the Contractor. The Contractor's authorization to begin Work under the Contract Documeots is subject to the Port iSSUing a fully executed Purchase Order. If Contractor begins work prior to Issuance of a fully executed Purchase Order, it does so at its own risk and agrees to assume all responsibility therefor, to bear all costs attributable thereto, including without limitation all costs associated with design profeSSionals, and to be liable for all damages caused thereby.

END OF GENERAL CONDlilONS SECTION 2

General Conditions (Rev'd November 1,2002) VIII· 12 - 52

OX 0001-1.0195

~

I

<:/ SECnON 3. GENERAL PROVISIONS

3.01 Tax Exemption:

The Port of Houston Authority, being a political subdivision of the State of Texas, is exempt from all sales taxes on material purchased in Texas and incorporated into a Project. The Contractor and any Subcontractor or Supplier must have or obtain all necessarY permits and certificates to purchase and fumish all material incorporated into the Project on a tax free basis.

3.02 Conflicts of Interest:

The Contractor and its officers, directors, shareholders, members, partners, employees or agents are positively forbidden from giving or lending money, or any other thing of value, to the Pbrt Authority, any Port Authority Commissioner, or to any Port officer, director, employee or agent or to any member of the family of any of the foregoing.

Should any of the above enumerated persons connected witIJ the Port Authority have a direct or indirect monetary interest in the Contractor's company or parent 'Company, then such person must disclose in writing the nature and extent of such interest to the Port Authority with any Bid/Proposal submitted.

3.03 Prevailing Wage Scale:

All onsite employees and employer's delivery persons shall be paid no less than the wages shown and, where shown, fringe benefits shown on the Port Authority's Prevailing Wage Rate schedute,.a copy of which is included in the Contract Documents. See such schedule for further details. However, where there is a contract between the employer and his employees or their respective representatives goveming fringe benefItS, the fringe benefits shall be'paid in accordance with such contract. Contractor should be aware that Texas Government Code Chapter 2258, Prevailing Wage Rates, provides, among other things, that

1. If the Contractor or a Subcontractor violates this law by underpayment of wages, the Contractor must pay to the Port Authority $60.00 for each worker employed for each calendar clay or partof the day that the worker is paid less than the wage rates required by the this Contract.. This money becomes the property of the· Port Authority.

2. The Contractor and each of its Suhcontractors lT1ust keep a record showing:

(a) the name ard oc:a&pation or each worker employed by the Contractor or Subcontractor in t~e construction of the Project; and

(b) the actual per diem wages paid to each worker.

These records must be open to inspection by the Port Authority at aU reason~~le hours.

3. Within 30 days of receipt of a complaint, the Port AuthOrity shall make a determination whether good cause exists to believe that the Contractor or Subcontractor has committed a violation of the law. If good cause is found to exist that a violation has been committed, the law requires the Port Authority to retain any amounts due under the Contract pending a final determination.

4. If the Contractor or Subcontractor and the affected worker(s) do not reach agreement within 14 days of notice of the Port Authority's determrnation, the issues must be submitted to binding arbitration in accordance with the Texas General Arbitration Act.

Genera! Conditions (Rev'd November 1,2002) VIII· 13 - 52

OX 0001-1.0196

5. Any awards made by the arbi.trator in favor of the worker(s) shan be paid out of the Contractor's funds held by the Port Authority. If the amounts held by the Port Authority are insufficient, the worker has a right of action against the Contractor or Subcontractor and the surety of the Contractor or Subcontractor to recover the amount owed, reasonable attorney's fees and court costs.

6. The Port Authority is not a party to the arbitration proceedings.

7. No officer, agent or employee of the Port Authority is liable in a civif action for any act or omission implementing or enforcing the applicable law unless the action is made in bad faith.

B. The Contractor is entiUed to rely on a certificate by a Subcontractor as to the payment of all sums due to those working for and under that Subcontractor until the contrary has been determined.

3.04 A.ssignment of A.ntitrust Causes of Action:

By submitting a Bid/Proposal or entering into a Contract with the Port Authority, the Contractor offers and agrees to assign to the Port Authority all causes of action it may have under the Antitrust Laws of Texas andlor Antitrust Laws of the United States. Such assignments shall be made and become effective when the Port Authority tenders final payment to the Contractor without any further action or acknowledgement by the parties.

3.05 Small Business Development Program:

The Port Authority has a Small Business Development Program which was created to help implement the Port Authority's objectives of promoting economic development and business opportunities for all sectors of the local economy. Contractor is required to use good..faith efforts to U$E! certified small business participation goals. Contractor shall provide information regarding its small business .participation in the form and at the times requested by the Port Authority.

The Small Business Development Program is administered by its Policies and Procedures (most recent version). Contractor should be aware of the contents of the Small Business Development Program Policy and Procedures. Specifically, Contractor should know that its failure to adhere to the requirements of the Small Business O&velopment Program may result in a default and termination of the contract.

In additional to other provisiOns of the Small Business Development Program, Contractor should be expressly aware of the oblig~tions to:

1. adhere to Port of Houston AuthOrity's Non-Discrimination Mandate:

2. submit uWization reports to the Port of Houston Authority on small busines.s participation;

3. make good-faith efforts to meet a contract small business partiCipation goal or to maintain small business participation; and

4. adhere to the dispute resolution mechanisms of·the Small Business Development Program.

General Conditions (Rev'd November 1, 2002) VIII· 14 - 52

OX 0001-1.0197

3.06 Contractor's Insurance Requirements·

The Contractor shall. at all times during the performance of Work under this Contract and though the expiration of the warranty period set forth in Section 5.53. provide and require all Subcontractors to provide insurance coverage with companies lawfully authorized to do business in Texas and acceptable to the Port Authority, which coverage will protect the Contractor from claims set forth below which may arise out of or result from the Contractor's operations under the Contract Documents and for which the Contractor may be legally liable, whether such operations are by the Contractor or a Subcontractor or by anyone directly or in directly employed by any of them, or by anyone for whose acts any of them may be liable, and meeting not less than the minimum requirements shown below. Such insurance is to be provided at the sale cost of the Contractor and all Subcontractors.

Any additional coverage in kind or limits will be sel out in the Special Conditions.

Kinds of Claims:

1. claims under workers' or workmen's compensation, disability benefit and other similar employee benefit acts which are applicable to the Contractor'S Work. to be performed;

2. claims for damages because of bodily injury, occupational sickness or disease, or death of the Contractor's employees;

3. claims for damages because of bodily injury, sickness or disease, or death of any person other than the Contractor's employees;

4. claims for damages insured by usual personal injury liability coverage which are sustained (1) by a person as a result of an offense direcUy or indirectly related to employment of such person by the Contractor, or (2) by another person;

5. claims for damages, other than to the Contractors Work itself, because of injury to or destruction of tangible property, including loss of use resulting therefrom;

6. claims for damage~ because of bodily injury, death of a person or property damage arising out of ownership, maintenance or use of a motor vehicle; and

7. claims involving contractual liability insurance applicable to the Contractor's indemnification obligations under the Contract Documents.

Minimum Insurance Requirements

Kinds of Insurance: Limits of Liabili~:

A. Workers' Compensation Statutory Texas Operations

Employer's Liability Accident $500,000 Each Accident Disease $500,000 Each Employee . DIsease $500,000 Policy Limit 8. U. S. Longshoremen and Statutory

General Conditions (Rev'd November 1, 2002) VIII - 15 - 52

OX 0001-1.0198

Kinds of Insurance: Limits of Liability

Harbor Workers Act (if exposure exists)

C. Commercial General Liability $2,000,000 General Including, but not limited to: Aggregate 1. premises/operations $2,000,000 Products/ 2. independent contractors' Completed Operations protective Aggregate 3. products and completed $1,000,000 Each Occurrence operations $1,000,000 Personal and 4. personal injury liability with Advertising Injury employment exclusion deleted $50,000 Fire Damage 5. contractual Uability 6. owned, non-owned and hired motor vehicles

D. Business Automobile $1,000,000 Combined Liability including All Owned, Single Limit Per Hired and Non-owned Occurrence Automobiles.

E. Umbrella Uability $2,000,000 Per OccurrenCe $2,000,000 Aggregate Bodily Injury and Property Damage

F. Builder's Risk The initial Contract Price and any On an all risk policy fOnT!

covering, without limitation, perDs of fire subsequent modifications thereto for the entire Work and materials stored at the site, )

and extended coverage and physical loss stored offsite or being shipped to the site. or damage, including without duplication on a replacement cost basis without of coverage, theft, flood, vandalism. voluntary dedl,Jclibles. malicious mischief, collapse, falsework, temporary buildings and debris removal including demolition occasioned by enforcement of any Applicable Laws, and covering reasonable compensation for the Port Authority's' and D~sign Consultant's services and reasonable expenses of the Port Authority and Design Consultant which are required as a result of such loss.

3.07 Proof of Insurance By Contractor:

The Contractor shall furnish, along with the executed Contract and prior to any equipment or personnel being brought on to the site, fully executed insu~nce forms approved by the Port of Houston Authority, which executed forms shall provide fOf thirty ·(30) days written notice to the Port Authority concerning any change. alteration, cancellation, non-renewal or expiration in coverage contained in the policies or evidenced by such forms.

General Conditions (Rev'd November 1, 2002) VIII -16 - 52

OX 0001-1.0199

The Port Authority Indemnitees shall be additional insureds under each policy except the Worker's Compensation policy and builders risk policy. Builder's risk shall include the Port Authority as an additional named insured.

All policies must provide for waiver of all subrogation rights against the Port of Houston Authority.

Contractor hereby waives all claims it may have against the Port to the extent any of such claims are covered by insurance required to be furnished by Contractor or any Subcontractors hereunder, and EVEN IF SUCH CLAIMS ARISE OUT OF. RELATE TO OR ARE BASED UPON THE PORT'S OWN NEGLIGENCE OR OTHER FAULT.

Upon request. certified copies of original policies shall be furnished to the Port Authority.

If the Contractor fails to purchase and maintain insurance required under the Contract Documents, the Port Authority may, but is no! obligated to, purchase such insurance on behalf of the Contractor and shall be entitled, at the Port Authority's election, to offset the costs thereof from amounts due Contractor or to reimbursement by the Contractor upon demand.

When any required insurance, due to the attainment of a normal expiration date or renewal date, shall expire. the Contractor shall, prior to such expiration, supply the Port Authority with certificates of insurance and amendatory riders or endorsements that clearly evidence the continuation of all coverage in the same manner, limits of protection, and scope of coverage as is required by the Contract Documents. Any renewal or replacement policies shall be in form and substance satisfactory to the Port Authority and written by carriers acceptable to the Port Authority.

If any policy required to be purchased pursuant to the Contract Documents is subject to a deductible, self-insured retention or similar self-insurance mechanism which limits or otherwise reduces coverage, the deductible, self-insured retention or similar self-insurance mechanism shall be the sole responsibility of the Contractor in the event of any loss.

3.0B Indemnification Bv Contractor:

To the maximum extent all~ed by law, the Contractor shall indemnify and hold harmless Port ~Authority Indemnitees, from and against any and all claims, demands, suits, causes of action, settlements, liabilities, costs, expenses, fines, and judgments (including, without limitation, reasonable and necessary court costs, experts' fees and attorney's, fees) (collectively, "Losses·), whether arising in equity, at common law. or·by statute, including without limitation the Texas Deceptive Trade Practices Act (as amended) or similar statute of ottter jurisdictions, or under the law of contracts, torts· (including. without limitation, .n~gl.i9..ence and strict liability withoUt regard to fault) or property, of every kind or character (including, without lim~ation, claims for property damage, personal injUry (including without Irmitation emotional distress), and economic lass), arising in favor of or brought by any of the Contractor's employees, agents, Subcontractors, Suppliers or representatives. or by any governmental agency or any other third party, based upon, in connection with, relating to or arising out of the Work, the Contractor's failure to comply with the Contract Documents, or the Contractor's actions or inactIons under.the Contract Documents, including without limitation any failure to pay taxes or failure to comply WIth any Applicable Laws, and EVEN IF ANY SUCH LOSSES ARE DUE IN PART TO ANY PORT AUTHORITY INDEMNITEES' CONCURRENT (BUT NOT SOLE) NEGLIGENCE OR OTHER FAULT, BREACH OF CONTRACT OR WARRANTY, VIOLATION OF STATUTE, OR STRICT L1ABIUTY WITHOUT REGARD TO FAULT; provided, however that Contractor's obligation under this Section 3.08 SHALL NOT extend to the percentage of damages caused by the Port's own negligence p~ other fault. breach or contract or warranty, violation of statute, or stnct liability without regard fa fauit. .

General Conditions (Rev'd November 1, 2002) VIII-17 - 52

OX 0001-1.0200

The indemnification obligation of this Section 3.08 shall apply regardless of the amount of insurance coverage held by the Contractor, including without limitation any such coverage under any worker's compensation act. disabUity act, or other act or law which would limit the amount or type of damages, compensation, or benefits payable by or for the Contractor, and shall not be limited by any insurance carried or provided by the Contractor in accordance with the Contract Documents or otherwise.

3.09 No Estoppel or Waiver.

The Contractor agrees that the Port Authority shall not be precluded or estopped by any action taken or thing done, written or oral, including, but not limited to, inspections made, payments made. or final completion of the Work, from showing that the true and correct amount and character of the work done and materials or equipment furnished by the Contractor do not in fact conform to the Specifications or other Contract Documents. The Contractor also agrees that the Port Authority shall not be precluded or estopped because of any action taken or not taken, from demanding and recovering from the Contractor any damages resulting therefrom or from the Contractor's other failure to comply with the Contract Documents.

Furthermore, no action or failure to act by the Port Authority shall constitute a waiver of any right or duty afforded to the Port Authority under the Contract or otherwise by law, nor shall any such action or failure to ad constitute approval of or acquiescence in any breach thereunder, except as may be specifically agreed to in a writing signed by the Chief Engineer.

3.16 Recovery of Attorney's Fees:

If Contractor brings any claim against the Port Authority and Contractor does- not prevail with respect to such claim, Contractor shall be liable for all attorneys fees incurred by Ihe Port Authority as a result of such claim.

3.11 Contractor's Qualifications:

. In entering into this Contract. Contractor represents and warrants that it has sufficient ability, ~experience and personnel to perfOf'!Tl the Work defined herein and that the representative of Contractor executing this Contract is duly authorized to do so.

3.12 Severability:

The invalidity, illegality, or un~nforceability of any portion, clause or provision of this Contract. or the occurrence -Q( any'. ~vent rendering any portioh. clause or provision of this Contract void, shall in no way affect the validity or-enforcj3ability of any other portion, clause or provision of this Contract Any invalid, illegal, unenforceable or void portion, clause or provision shall be deemed severed from this Contract and the balance of this Contract shall be construed and enforced as if this Contract did not contain the particular portion, dause or provision held to be invalid, illegal, unenforceable or void. The parties further agree to reform this Contract to replace any stricken portion, clause or pr~vision with a valid portion, clause or provision that comes as dose as possible to the intent of the stricken portion, clause or provision. This Section 3.12 shall not prevent the entire Contract from being void should a portion, clause or provision which is the essence of this Contract be determined to be invalid, illegal. unenforceable or void.

3.13 Successors and "Assigns:

(a) The Port and Contractor respectively bind themselves, their partners, successors, assigns and legal representatives to the other party hereto and to partners, successors, assigns and

General Conditions (Rev'd November 1,2002) VIII- 18 - 52

OX 0001-1.0201

·0 legal representatives of such other party in respect of all covenants. agreements and obligations contained in the Contract Documents.

(b) Contractor shall not assign any rights or obligations under or interest in the Contract Documents without the prior written consent of the Executive Director of the Port or his designee. The Port may assign its rights and obligations under and interest in the Contract Documents in whole or in part without the consent of Contractor.

3.14 No Third Party Beneficiaries:

Except as expressly provided herein. none of the provisions of this Contract is intended for the benefit of any other party except for the parties hereto.

3.15 Change of Control:

Contractor and any party which holds an equity or voting interest in Contractor shall not sell, assign, convey, encumber or otherwise transfer more than twenty-five percent (25%) of the equity or voting interest. whether it be in the form of stock, partnership interests. membership interests or other unit of ownerShip, in Contractor without the express prior written consent of the Port.

3.16 Governing Law:

This Contract, its interpretation and any disputes relating to, arising out of or connected with this Contract, shall be governed by the laws of the State of Texas. without regard to its conflict of law provisions.

END OF GENERAL CONOmONS SECTION 3

General Conditions (Rev'd November 1, 2002) VIII-19 - 52

OX 0001-1.0202

SECTION 4. REGULATORY AND SAFETY REQUIREMENTS

4.01 Laws to be Observed:

The Contractor is deemed to have made himself fammar with and at all times shall observe and comply with all Applicable Laws, and shall, in accordance with Section 3.08, indemnify and save harmless the Port of Houston Authority, and its Commissioners, officers, employees and agents against any claim, demand, suit, cause of action, liatiility, cost, expense, fine, settlement or judgment arising from the violation of, or failure by Contractor its Subcontractors, Suppliers or any of its or their employees, agents or representatives to comp!y with any such Applicable Laws.

4.02 Code Regulations:

Where the requirements of the local building code or other Applicable Laws conflict with the Contract Documents and such requirements are mandatory or more restrictive, such requirements shall be followed to the same extent as if specifically set out herein in fuQ. If the Contractor observes that any Contract Document fails in any respect to conform with Applicable Laws, Contractor shall immediately notify the Port Authority by written RFI and identify any such failures before proceeding with any part of the Work affected thereby. In the event a Design Consultant is utilized for the Project, the Contractor shall send such RFI to the Design Consultant, with a copy of the transmittal letter to the Inspector and Chief Engineer.. If the Contractor performs Work that it knows or reasonably should have known to be contrary to or In conflict with Applicable Laws, the Contractor shaD assume full responsibility for such Work and shall bear all costs attributable thereto, including without limitation all costs associated with design profeSsionals, and shall be liable for all damages caused thereby.

Provisions of the Contract Documents which are more stringent than the minimum requirements of such codes, regulations or Applicable Laws shall be followed, and no requirements of the Contract Documents may be modified or voided because any such requirements are not specifically required by such codes, regulations or Applicable Laws.

4.03 Permits and Licenses:

The Contractor shall procure all permits and licenses, pay all charges and fees, and give all notices necessary and inCidental to the prosecution of the Work. This requirement shall not pertain to permits required by the United States Army Corp of Engineers, which permits will be obtained by the Port of Houston Authority.

4.04 Barricades, Warning Lights -and Warning Signs:

The Contractor shall be solely responsible for furnishing, erecting and maintaining suitable barricades, warning signs, flares, barriers, cones, lights, flags, Signals, flagmen and any and all other safety devices which are or may become necessary to adequately protect the Work. Contractor's workers and all other parties coming onto the site.

Upon completion of the Work, all such safety devices and evidence thereof shall be immediately removed.

4.05 Sanitary Facilities:

." .

The Contractor shall provide sanitary facilities for use of the workmen, and shall maintain such facilities in a clean and sanitary condition until the expiration or termination of the Contract, at which time they shall be immediately removed.

General Conditions (Rev'd November 1, 2002) VIII- 20 - 52

OX 0001-1.0203

4.06 ~ Site Health and Safety Coordinator:

v

The Contractor shall designate a qualified Site Health and Safety Coordinator (the ·SHSC") to ensure that all Applicable Laws pertaining to health and safety are complied with and all health and safety requirements are implemented. The SHSC shall have the authority to terminate work when any such work or condition affecting such work or the Project is found to be unsafe. The name and qtJalifications of the SHSC shall be furnished to the Chief Engineer for review prior to commencement of Work.

4.07 Health and Safety:

The Contractor shall submit five (5) copies of a health and safety plan for the Work to the Chief Engineer for review at least forty-eight (48) hours prior to commencing performance of any Work at the site. Prior 10 beginning any field work at the site, such plan shall be certified, by signature of the SHSC, that it complies with applicable portions of OSHA standards 29 CFR 1910 and 29 CFR 1926. Such plan shall provide, at a minimum, for safe working practices, medical surveillance. engineering safeguards, personnel protective equipment. training. safe operating procedures, emergency planning. reporting and sanitation. Notwithstanding the Chief Engineer's review of the health ~,nd safety plan, the Contractor. and not the Port Authority. shall be responsible for and have control over ensuring the safety of its personnel and its Subcontractors, agents. representatives and any other person who visits the site in connection with the Work.

4.08 Accident Reporting:

The Contractor shall immediately report to the Port Authority's Police Department at telephone number (713) 670-2647 and the Chief Inspector of the Port Authority any jobsite accident, injury, illness, or environmental release. The Contractor shall submit to the Chief Inspector of the Port Authority as soon as possible but no later than two (2) working days thereafter, a fuU written report giving the date, time, location, description (in a degree of detail acceptable to the Chief Engineer). and personnel involved. Such report shall be Signed by Contractor's designated SHSC.

)

4.09 Fill Material Policy:

_ The Port of Houston Authority. has adopted a policy ~ing the acceptance of fill material to be incorporated into the Port Authority's construction Projects. Material governed by this policy shall include soil. sand for cement stabilized sand and concrete. road base materials, sub-ballast for railroad construction, and any other materials brought onto Port A!Jthority property for construction purposes. It is the intent of this policy tQ.- ensure that only clean uncontaminated materials will be placed on Port Authority property and any materials pl~ced on Port Authority property shall be subject to removal by the Contractor at its S~E!. e1'Qense if found-not to be in complianCe with the requirements outlined herein. Testing to determine the suitability_of materials to be used on Port Authority property shall be performed by a testing laboratory employed by and paid by the Port of Houston Authority. The following tests shall be performed:

A. Total Metals:

Total metals by volume shall not exceed "background" levels for the following metals as measured by EPA Test Method 601017000 series. The assocIated required method detection limits for each metal, as listed below, must be met by the laboratory.

General Conditions (Rev'd November 1,2002) VIII· 21 - 52

OX 0001-1.0204

\. / jL METAL DETECTION METAL DETECTION . '"

LIMIT (mglkg) LIMIT (mglkg)

Antimony 0.5 lead 0.1

Arsenic 0.5 Mercury 0.1

Barium 0.5 Nickel 0.1

Beryllium 0.1 Selenium 0.5

Cadmium 0.1 Silver 0.1 Chromium 0.5 Thallium 0.5

Copper 0.1 Zinc 0.5

B. Total Petroleum Hydrocarbons:

TPH shall not exceed the Tier 1 Residential Standards defined on any of the reported fractions as determined by Texas Test Method 1005.

C. Reuse of Soils with Concentration above Background:

If the concentration of naturally occurring metals exceeds determined background levels set forth above or TPH·is detected. the soils are then considered as reused as defined in the Texas Risk Rectuction Program (30 TAe 350.36). The relocation of soils containing chemicals of concern for reuse purposes must comply with the foUowing requirements:

1. Soil must be sampled for volatile organic compounds (EPA Method 8260b).

Semivolatile Qf,9<lnic compounds (EPA Method 827Ob) and PCBs (EPA Method 8082).

2. The excavation of soils' containing chemicals abQve background during construction activities (e.g., installation, repair, removal of telephone lines or other utilities, but not ct~, remediations, or PST tank removal actions) and ··the subsequent replacement' of those soils into the same excavation are nol conSidered relocation under the definition in 30 T AC 350.36.

3. '"' Soils to be reused must meet the residential critical surface or subsurface soil PCls as applicable for the fill area. The concentration of chemicals in the soil must not exceed the Tier 1 Residential son PCLs defined in Table 1 30 T AC 350.

4. If the soil contains chemicals above background, a representative number of samples must be collected to determine concentration of· constituents in til! material.

All sampling and testing required pursuant to this Section 4.09(C) will be conducted by the Port Authority and aU testing reports shall be provided to the Port AuthOrity. Contractor shall provide the Port Authority with written notice of its activities sufficiently in advance of such activities so that the -Port "Authority can conduct such sampling and testing. Contractor shall not be entitled to reuse any soil pursuant to this Section 4.09(C) without prior written approval by the Port Authority. The determination by the Port Authority of whether is will allow reuse of soil pursuant to this Section 4.09 is a matter

General Conditions (Rev'd November 1,2002) VIII- 22 - 52

OX 0001-1.0205

within the sole discretion of the Port Authority, and the Port Authority reserves the right to refuse the use of any soil.

4.10 Spill Prevention Plan:

A. General:

At least forty-eight (48) hours prior to commencing performance of any Work at the site. the Contractor shall- submit to the Chief Engineer for review and approval a Spill Prevention Control and Counter Measure Plan (SPCC) meeting the requirements of Code of Federal Regulations (CFR) published by the office of the Federal Register National Archives and Records Administration, 40 CFR 112.3 - 112.7. The plan shall be specially designed for the Contractor's planned work methods and procedures. The plan shall be designed to complement all applicable safety standards, fire prevention regulations and pollution prevention policies and procedures. The plan shall indude estimates of the quantity and rate of flow should equipment fail, and detail containment andlor diversionary structures to prevent spills from.)eaving the site or migrating into the Houston Ship Channel or other navigable waters. The plan shall include methods of recovery of spilled materials and all applicable twenty-four (24) hour emergency phone numbers, including without limitation that of the Port police. The Contractor shall not commence any field work prior to approval of such plan by the Chief Engineer.

B. Reporting:

(1) The Contractor shall immediately report to the Port Authority's Police Department at telephone number (713) 670-2647 and to the Chief Inspector, any spill or release, whether or not it is associated with this Contract Thereafter, within two (2) working days after the occurrence of such event. Contractor shall submit a written report describing such event in a degree of , ) detail reasonably acceptable to the Chief Engineer.

(2) If a spill migrates into the Houston Ship Channel or other navigable waters. in addition to the requirements of the foregoing paragraph 4.10(8)(1), the Contractor' shall contact the U. S. Coast Guard Response Supervisor at telephone number (713) 671-5121. to review procedures and the SPCC plan and to coordinate activities ~nd schedules, prior to commencement of cleaning .activities. '

c. ImPlementation:

The Contractor shall immediately respond in accordance with the SPCC plan in the event of a spill.

D. Disposal:

The Contractor shall dispose of spilled materials in accordance with EPA and TNRCC regulations and any other Applicable Laws. In connection with such disposals. the Contractor shall use only those transporters and dIsposal facilities that are approved by the Port of Houston Authority. All cost of collection, containment and disposal of spilled materials'shall be the responsibility of the Contract.o;. ,

General Conditions (Rev'd November 1. 2002) VIII- 23 - 52

OX 0001-1.0206

4.11 Cultural Resources:

The Contractor shall not remove or disturb, or cause or permit to be removed or disturbed, any historical, archaeological, architectural, or other cultural artifacts, relics, vestiges, remains, or objects of antiquity. If any such items are discovered on the premises, the Contractor shall immediately notify the Chief Engineer of such discovery, and the site and the items discovered shall be protected by the Contractor from further disturbance until a professional examination of them can be made or until clearance to proceed is authorized by the Chief Engineer.

4.12 Use of Explosives:

The use of explosives on Port Authority property is prohibited. Any exemption to this rule will be noted in the Special Conditions. If not so noted, prior approval for the use of explosives mlist be obtained in writing from the Chief Engineer.

4.13 Burning:

Burning of materials or setting of any fires on Port property is strictly prohibited. Any exception to this rule will be noted in the Special Conditions. If not so noted, prior approval for buming or fires must be obtained in writing from the Chief Engineer.

4.14 Pennit fDr Welding and Cutting:

A -hot woM<" Permit must be obtained from the Port Authority's Marine' and Fire Department prior to commencement of any welding or cutting on Port Authority property. Prior to commencement of such hot work, the Contractor shall also contact other applicable local fife departments to determine the need for any other permits which may be required by such departments. Once the hot work Permit is executed and issued to the Contractor by the Port Authority's Marine and Fife Department. the Contractor must notify such department by telephone at (713) 670-2636 each day before a day during which such activity is scheduled to take place.

Prior to any -hot work- being performed on a barge, platform, or other floating faCility. Contractor must obtain a permit from the U. S. Coast Guard. The Contractor must contact the U. S. C. G. Captain of the Port at (713) 672-6639 for detaiis.

4.15 Interference with Port Operations and Naviqation:

The Contractor shall conduct its Work in such a manner so as to not hinder the flow and navigation of sh!P.s, 1?9rges, cargoes and other vessels to arid from the Port Authority's facilities, so as to minimize interference with any o!her operation or work and so as to provide safe conditions at and around the site.

Federal, state, U.S. Coast Guard and local statutes, laws, rules, regulations. ordinances, codes and rules of common law concerning navigation shall be complied with, and public advertisement, waming signs, buoys or other such requirements shall be complied with at the Contractor's·expense.

4.16 Misplaced Materials:

The Contractor shall diligently prevent any material or other matter from falling into the Houston Ship Channel or other navigable waters. Any such material,which, in the opinion of the Chief Engineer, may be dangerous to or obstruct navigation or future dred~h~" shall be removed with utmost dispatch.

The Contractor shall give immediate notice to the Chief Engineer of such potential danger or obstruction and when ordered to by the Chief Engineer the Contractor shall mark or buoy such obstructions until they are removed. If the Contractor refuses, neglects or unduly delays compliance with this Section 4 16, such

General Conditions (Rev'd November 1, 2002) VIII- 24 - 52

OX 0001-1.0207

I, .) '-j"

obstruction or potential danger may be removed or otherwise dealt with by the Port Authority. The Port has the right to offset all costs incurred in connection with such removal or other effort by the Port, including without limitation all costs associated with design professionals: against any amounts due the Contractor. Furthennore, if Contractor is not at that time owed any amounts by the Port and Contractor fails or refuses to pay such costs, such costs may be recovered from the Contractor's surety under the Contractor's performance bond.

4.17 Work On or Around Port Authority Grain Elevators:

If any Project involves Work in or around grain elevators, special safety measures will be required. Any requirements for such Work will be set out in the Special Conditions.

4.18 Work On or Around Railroad Tracks:

If any Project involves Work on or around the Port AuthOrity's rail systems, special safety measures must be taken. Any requirements for such Work will be set out in the Special Conditions.

4.19 Discovery of Hazardous Substances:

In the event the Contractor encounters on the site material reasonably believed to be Hazardous Substances that has not been rendered harmless, the Contractor shall immediately stop Work in the affected area and report in writing the facts of such encounter ·to the Chief Engineer, the Port Police, the Environmental Affairs Manager of the Port Authority and the Inspector. Work in the area affected shall not thereafter be resumed except by \\Titten order of the Chief Engineer unless and until the material is determined not to be Hazardous Substances or such Hazardous Substances are rendered harmless.

The Contractor shall be responsible for identifICation, abatement. deanup, control, removal, remediation and disposal of any Hazardous Substances in or on the site brought to the site by the Contractor or any Subcontractor or Supplier (other than any Hazardous Substances that are required by the Contract Documents to be used in connection with the Work). Contractor shall obtain any and all _permits necessary for the legal and proper handling, transportation, and disposal of such HazardOUS . Substances and shall, prior to undertaking any such abatement, cleanup, control, removal. remediation . and disposal, notify the Port Police, the Chief Engineer and the Environmental Affairs Manager such that lhey may observe such activities; prcivided that it shall be Contractor's sole responsibility to comply with Applicable Law governing any such activities.

4.20 Disposal of Exca.....ated Materials and.certain Other Waste:

The Port of Houston Authorjty's~.Environmental Department will perform all the necessary tests for all unstable excavat"ed' materials and all excess unsuitable earthen, trash and debris materials. The Contractor shall submit to the Port's Environmental Department the names of all Subcontractors transporting such materials and locations of aI/ disposal sites where such malerlals will be disposed of and Shall provide copies of any permits required for such Subcontractors to so transport and dispose of such materials. Such Subcontractors must be approved by the Port of Houston pnor to the removal of any such material from the site. All such material must be disposed of at the approved locaticin(s) and the Contractor shall provide documentation to the Port of Houston Authority evidenCIng to the satisfaction of the Port the final disposition of all such materials_

4.21 Cha-racterization of Waste Materials:

With respect to matenals requiring disposal off-site,/prior fo Contractor removing any such malenals from the site, all such materials shall be characlerized by the Port Authority Environmental Group and its determinallon as to the characterization of such materials shall be final and conclusive_

General Conditions (Rev'd November 1, 2002) VIII· 25 - 52

OX 0001-1.0208

4.22 Environmental Management System:

The Port of Houston Authority (PHA) has developed an Environmental Management System (EMS). As part of the EMS, the PHA has adopted an environmental compliance policy and has developed environmental management programs. Contractor shall adhere to such policy and programs and provide information to the Port Authority in the form and at the times requested by the Port Authority in furtherance of such policy and programs.

END OF GENERAL CONDITIONS SECTION 4

...: ... "

General Conditions (Rev'd November 1, 2002) VIII· 26 - 52

OX 0001-1.0209

o

SECTION 5. PROSECUTION OF THE PROJECT

5.01 Commencement of Work:

Work shall be commenced by the Contractor only after a fuUy executed written Purchase Order has been issued by the Port Authority. In the event the Contractor begins performance of the Work prior to issuance of such a Purchase Order, the Contractor proceeds at its own risk and shall bear aU responsibility therefor and all costs attributable thereto, including without limitation all costs associated with design professionals, and be liable for all damages caused thereby. The Contractor acknowledges that the Port Authority has no liability to or obligation to pay the Contractor for any Work performed in connection with the Project prior to the issuance of such a Purchase Order.

5.02 Start Date for Field Work:

A preconstruction meeting will be held prior to commencement of any field operations at a location and time to be determined by the Port.

In most instances, the start date for field work will not be set 'out in the BidlProposal Documents.

After award of the Contract by the Commission and before the Purchase Order being issued, the parties shall agree on the start date for field work. If the parties cannot agree to such a date, the Chief Engineer will determine the start date for field work. The Chief Engineer's decision shall be final and binding on the Contractor.

In some instances, the Bid/Proposal Documents will provide the start date for field work and/or the completion date or number of days during which period of time the Work must be completed. In such an instance, the Contract Price shall include all labor costs (including without limitation any overtime. shift work and weekend work) necessary for the Contractor to meet the Contract Time. Time extensions will be granted on such Projects only for events of Force Majeure.

') 5.03 Planning of Work and Progress Schedule:

/

Within ten (10) working days after the Contractor has been notified of the award of Contract and . before any field work begins, the Contractor shall furnish for review and approval by the Chief Engineer ., live (5) copies of its proposed Progress Schedule covering prosecution of the Work. which Progress Schedule IS to be prepared on a working day basis unless the Contract Time is set forth in the Bid/Proposal Documents, in which case the Progress Schedule shall be prepared on a calendar day baSIS. .

A working day is defined as a calendar day, excluding Saturdays, Sundays and the A. G. C.

holidays for the applicable year when Work can be performed for a period of not less than seven (7) hours between 7:00 AM and' 6:00 PM. A. G. C. hoJrdays falling on Sunday are observed on Monday. Holidays falling on Saturday are not observed. The foregoing definitions of working days and holidays are no! intended to dictate the times during which a Contractor may perform Work or apply to situations in which the Contract Time is established by the BidIProposal Documents. If Contractor wants or intends to work during times other than between 7:00 AM and 6:00 PM on a working day as defined'nerein, then Contractor must submit a proposed schedule setting forth the intended days and hours during which it intends to work to and obtain prior written consent from the Chief Engineer to the schedule.

The' Contractor shall provide the Progress Schedule in bar graph form as well as critical path form. The Progress Schedule shall be dated and designated as the baseline schedule. In addition to a hard copy, if requested by the Port Authority, the Contractor ~halt provide the Port Authority a diskette containing an electronic copy of the Progress Schedule (and any revisions and updates thereto as such revisions and updates are made from time to time), mcludmg all resource loading and logic diagrams.

General Conditions (Rev'c November 1, 2002) VIII - 27 - 52

OX 0001-1.0210

The Progress Schedule shan state the sequence at operations and shall show startifinish dates for all critical and non-critical path construction activities. The Progress Schedule shall indude all activities necessary for effective planning. procurement. construction. construction management and timely completion of the Work within the Contract Time, including, but not limited to: start of construction, completion, permit dates. procurement dates, estimated dates that fabrication of items of Equipment or other Work will commence and be completed, dates for delivery thereof to the jobsile. dates required for reviews and approvals by the Port Authority for the Contractor to maintain the Progress Schedule (which dates shall provide for a sufficient time for such review), and the dates for the Port Authority to supply Port Authority furnished materials. if.any. Furthennore, the Progress Schedule shall designate sources of supply of all Materials and paints of manufacture and fabrication of Equipment or other wor\{ to be manufactured or fabricated offsite.

Such Progress Schedule shall be subject to approval by the Chief Engineer. and. once approved.

no changes to the Progress Schedule may be made without approval of the Chief Engineer. In the event Contractor believes a change in the Progress Schedule is appropriate, the Contractor shall submit to the Chief Engineer a signed writing which sets forth the reason for such changes and warrants that such changes or deviations are necessary.

Contractor shall issue revised Progress Schedules to the Port Authority promptly after Change Orders or Construction Change Directives affecting the Contract Time have been finalized, but in no event later than ten (10) calendar days after the date that the relevant Change Orders or Construction Change Directives are finalized. Each revised Progress Schedule shall be dated and identified as a "Revised Progress Schedule- and shall bear the appropriate revision number. Each Revised Progress Schedule shall clearly demonstrate all changes in resource loading and/or the planned start and finish dates for all critical and non-eritical path numbered Work activities as compared to the most recent Progress Schedule approved by the Chief Engineer. Revised Progress Schedufes are subject to the approval of the Chief Engineer. and, once approved, no changes may be made thereto without approval of the Chief Engineer. In the event Contractor believes a change in the Revised Progress Schedule is appropriate. the Contractor shalf submit to the Chief Engineer a Signed writing which sets forth the reason for such changes and warrants that such changes are necessary.

No extension of the Contract Tame and resulting modification to the Progress Schedule may occur _ without a Change Order or Cons~ction Change Directive that modifieS the Contract Time.

5.04 Submittal of Updated Progress Schedule:

The Contractor-shall provide the Port Authority with Progress Schedule updates (i) on a monthly or more frequent basis as the Port Authority requests. and (ii) in between such periodiC updates if nonprogress OJ. slq~ _progress is ~ch as to render the previously submitted and approved Progress Schedule inaccurate. - Such Progress Schedule updates shall reflect accurate conditions. identify and inform the Port Authority of all deviations in every numbered as-planned actIvity contained in the latest Progress Schedule approved by the Chief Engineer and explain-the basis for such deViations as well as the Contractor's plan to bring the schedule back into compliance with the latest approved Progress Schedule. Each Progress Schedule update shall be dated and identified as a ·Progress Schedule Update" or ;n the event of an update to a Revised Progress Schedule a "Revised Progress Schedule Update", in each instance noting the appropriate update number. Each Progress Schedule update shall clearly demonstrate all changes in resource loading and/or the planned start and finish dates for all critical and non-critical path numbered Work activities as compared to the most recent Progress Schedule approved by the Chief Engineer.

5.05 Time of Completion and Liquidated Damaqes; ,.

TIME IS OF THE ESSENCE OF THE CONTRACT. The Contractor understands and agrees that if the Contractor fails to acceptably complete its contractual obligabon to the Port Authority within the

Gene~1 Conditions (Rev'd November 1, 2002) VIII- 28 - 52

OX 0001-1.0211

() (.J Contract Time, the Port Authority will be damaged, Since damages to the Port Authority for failure of the Contractor to complete the Work within the Contract Time are anticipated at the inception of the Contract, the Contractor shall and hereby does waive any claims that such failure failed to damage the Port Authority and hereby agrees that the Port's rights to such damages are absolute.

If the Contract Documents provide for payment of liquidated damages, the Contractor understands and agrees that the exact amount of damages to the Port Authority as a result of failure of the Contractor to complete the Work within the Contract Time is and will be difficult to determine. The Port Authority and the Contractor recognizla. the delays, expense, and difficulties involved in proving in a legal or mediation proceeding the actual loss suffered by the Port Authority if the Work is not completed within the Contract Time. Accordingly, instead of requiring any such proof. the Port Authority and the Contractor agree that as liquidated damages for delay (but not as a penalty), the Contractor (or its surety) shall pay the Port Authority, for each CALENDAR day (not work day) the Work remains uncompleted, the sum set out in the Contract Documents as liquidated damages for the Project. The Contractor agrees that such sum is a fair and reasonable estimate of the amount of damages the Port Authority will incur if the Project is not completed within the Contract Time. The number of calendar days comprising the period of time over which liquidated damages accrue shall not be reduced for any reason, including without limitation, by (i) any period of time that Work is not performed by reason of a termination pursuant to Section 5.48, or (ii) in a case where the Contractor's surety elects to complete the Contract. by the period of time it takes such surety to complete the Contract. The Contractor (and its surety) specially binds and obligates itself to pay such damages to the Port Authority on demand or, at its option, the Port Authority may withhold from the Contractor or its surety or offset such damages against any amounts due the Contractor or its surety under the Contract or otherwise under Applicable Law. In case full payment for the Work shall have been made, the Port Authority shall have the right to recover from the Contractor and, its surety the amount of such liquidated damages as determined under the Contract.

5.06 Actual Damages in Lieu of Liquidated Damages:

The parties' agreement as to liquidated damages constitutes only an agreement between the parties as to the minimum amount of damages suffered by the Port Authority in the event the Contractor fails to complele the Work within the Contract Time. If the Port Authority suffers damages in excess of such minimum amount due to the Contractor's failure to complete the Work within the Contract Time, the Port Authority shall have the right to recover its actual damages. Such c:lamages may be withheld from lhe Contractor or its surety or offset 'against any monies owed the Contractor or its surety by the Port Authority or the Port Authority may collect such damages from the Contractor and the surety on the Contractor's performance and payment bonds..

5.07 No Delay Damages:

The Contractor' stiall receive no ftnanCial compensation for delay or hindrance to the Work. In no event shall the Port Authority be liable to the Contractor or any Subcontractor or Supplier, any other person or any surety for or any employee or agent of any of them, for any damages arising out of or associated with any delay or hindrance to the Work, regardless of the source of the delay or hindrance, including events of Force Majeure, AND EVEN IF SUCH DELAY OR HINDRANCE RESULTS FROM, ARISES OUT OF OR IS DUE, IN WHOLE OR IN PART, TO THE NEGLIGENCE.. BREACH OF CONTRACT OR OTHER FAULT OF THE PORT AUTHORITY. The Contractor's sole remedy in any such case shall be an extension of time.

5.08 Time Extensions:

(a) If during the progress of the Work, weather aondltions, 'events of Force Majeure, or other causes of delay which are solely outside the control of the Contractor occur such that, in the Contractor's reasonable opinion, the Contractor IS entitled to have such day not count against the Contract Time, it

General Conditions (Rev'd November 1,2002) VIII - 29 - 52

OX 0001-1.0212

shall file with the Chief Engineer on the first working day after the week in which such event fll"St occurs, a request for a time extension. Such request must contain, at a minimum, the following information:

1. the latest Revised Schedule where a change in the Contract Time was previously approved by formal Change Order and/or Construction Change Directive, along with any Change Orders and Construction Change Directives upon which Contractor is relying;

2. the latest Schedule Update which must reflect actual as-built startlfinish dates of all relevant activities ·,and be without any constraints. logic changes, hiatuses or other interruptions or deviations;

3. graphic analyses comparing the Contractor's as-planned base-line schedule (or latest as-

planned Revised Schedule, if applicable) versus Schedule Update showing actual as- built conditions, either by computer-generated graphics or by similar presentations, which comparison must identify all relevant critical path changes; ,

4. written cause and effect narratives which identify each critical path activity by: (a) activity number; (b) the specific calendar dates when the critical path delay occurred; (c) the cause of such delay; and (d) the specific contractual provisions being relied upon by the Contractor to establish the Port Authority's responsibility for each proposed, pending or disputed change in the Contract Time, induding the contractual provisions which establish whether the claimed delay entitles 1he Contractor to an extension of time;

5. written explanation wh1ct1 clearly depicts and explains all instances of Concurrent Delay to the critical path;

6. written explanation of any constraints, logic changes, critical path changes, hiatuses, interruptions or similar deviations, including all underlying assumptions relating to any such changes made by the Contractor in compiling the delay anatyses required by the Contract Documents:' and

7. written statement describing in a degree of detail acceptable to the Chief Engineer all steps taken and being taken by Contractor to mitigate against the cause of the relevant adverse schedule impact

(b) No extensions will be allowed for any of the following occurrences:

1. when the principal units of Work and tasks on the critical path are not in progress or are not delayed by the eVent of delay. or hindrance; ,

2. when at least seven (7) hours of available working time remain out of the working day or calendar day, as applicable;

3. while materials are drying and it is possible for the Contractor to enclose the area and use drying devices;

4. when an event of delay or hindrance occurs on a Saturday, Sunday or AGC holiday, unless Contract Time is set forth in the Bid/Proposal Documents;

5. when an event of delay or hindrance occurs after the expiration of the Contract Time;

6. when events of Concurrent Delay overlap the claimed delay; and

General Conditions (Rev'd November 1, 2002) VIII- 30- 52

OX 0001-1.0213

7. for Contracts with the Contract Time set forth in the BidlProposal Documents, when an event of delay other than an event of Force Majeure occurs.

(c) Failure to timely file requests for time extensions as required in this Section 5.08 shall constitute a waiver of any rights the Contractor may have had to such time elCtensions.

(d) Approval or disapproval of time extensions shall be made in the sale discretion of the Chief Engineer and such decision shall be final. Any extension of time shall not release the Contractor or its surety from their obligations under-the Contract Documents, all of which shall remain in full force until completely discharged.

5.09 lack of Satisfactory Progress:

If the Contractor receives notice from the Port Authority that the Port is concerned with the rate of progress of the Work, the Contractor shall, whether or not it disputes responsibility for the delay, provide the Chief Engineer with a written narrative setting forth in a degree of detail acceptable to the Port a plan of recovery to overcome or mitigate the delay. Moreover, if in the opJnion of the Chief Engineer the rate of progress of the Work is not satisfactory, is not rapid enough to ensure completion within the Contract Time, or the Contractor's proposed recovery plan is inadequate to achieve such recovery, the Chief Engineer shall have the right, but not the obligation, to order the Contractor to (i) employ additional people, (ii) increase its ptant or (iii) prosecute the Work by working longer hours on any portion of the . Work which is deemed by the Chief Engineer to be behind schedule, and the Contractor shall forthwith comply with any such orders without additional compensation. Alternatively, the Port Authority may make good any such defiCiencies, offset the reasonable cost thereof, including, without limitation, the Poet's' expenses and compensation for any professional services (including without limitation any professional architectural or engineering design services and any attorney.s fees) made necessary thereby, from any amount due the Contractor or its surety from the Port Authority.

5.10 Independent Contractor.:

It is agreed between the parties that the Contractor is and shall be an independent contractor.

- Nothing in the Contract Documents shall create a relationship of employer and employee or principal and _agent between the Port Authority, .on the one hand, and the Contractor or any of its employees, Subcontractors, Suppliers or agents of any thereof, on the other hanc!. Neither the Contractor nor any of its employees, Subcontractors, Suppliers OF agents. shall have the ability to bind or obligate the Port Authority for any purpose whatsoever.

The Port Authority shan not haxe the right to control the manner in which or prescribe the method by which the Contract9r Qerforrns the Won.. As an'independent Contractor. the Contractor shall be solely responsible for supervision of anC! performance of the Work and shall prosecute the Work at such time and seasons, in such order or precedence, and in such manner, using such methods as Contractor shall choose; provided, however, that the order, time, manner and methods of prosecution shall be in compliance with Contractor's Standard of Care and Work shall be completed within the Contract Time and in accordance with the Contract Documents.

The Contractor shall not be relieved of its obligations to timely perform the Work in accordance with the Contract Documents either (i) on account of activities or duties of the Chief Engineer, Inspectors, or Port Authority or Design Consultant relating to administration of the Contract, or (ii) because tests, inspections or approvals were reqUired from or performed by a person other than the Contractor and such person did not timely perform such inspection or test or issue such approval.. ;...,.

General Conditions (Rev'd November 1, 2002) VIII· 31 - 52

OX 0001-1.0214

5_11 Subcontractors and Material Suppliers:

The Contractor must perform at least twenty-five percent (25%) of the total dollar value of the portion of the 'Contract Price attributable to the Work 'erformed in the field with its Own Forces. The existence and extent of such forces will be verified by certified payrolls submittecl in accordance with the Prevailing Wage Rate section of the Contract Documents and as requIred under these General Conditions.

The Contractor shall not utilize any Subcontractor or Supplier other than those disclosed on the Subcontract Sheet submitted to the Port as part of Contractor's BidlProposal without prior written approval from the Port Authority_

The Contractor shall be responsible to the Port Authority for acts and omissions of the Contractor's employees, Subcontractors and Suppliers, and their agents and employees, and other persons performing portions of the Wor1< pursuant to an agreement with the Contractor.

The Contractor shall promptly, out of the amount paid to the Contractor on account of such person's portion of the Work, pay each Subcontractor, Supplier and other Persons supplying labor, Materials or Equipment in the performance of the Work upon receipt of payment from the Port Authority. The Contractor shall, by appropriate agreement with each SUbcontractor and Supplier, require each such Subcontractor and Supplier to make payments in a simUar manner to those providing labor, Materials and Equipment in connection with the WOrK_ The Port Authority shall have no obligation to pay, or see to the payment of, any monies to such parties.

By an appropriate written agreement. the Contractor shall require each Subcontractor and Supplier, to the extent of the Worl< to be performed by such Subcontractor or Supplier, to be bound to the Contractor by the terms and conditions of the Contract Documents, and to assume toward the Contractor all of the liabilities, obligations and responsibilities that the Contractor, by the Contract Documents, assumes toward the Port Authority, Each subcontract agreemert shall preserve and protect ine rights of the Port Authority under the Contract Documents with respect to the WorK to be performed by Subcontractors or Suppliers so that the subcontracting of such WorK will not prejudice such rights. Contractor shall require all Subcontractors to (i) carry appropriate insurance as required under the Contract Documents, (ii) ,_ indemnify the Port Authority Indemnitees to the same extent that the Contractor is required to indemnify the Port under the Contract Documents. and (iii) assign all Intellectual Property Rights to the Port Authority to the same extent that the Contractor is required to assign such rights to the Port under the Contract Documents_

5.12 Port a~ Third Party Beneficiary of Subcontracts:

Each subcontract enter~d into between Contractor and a Subcontractor or Supplier shall provide that the Port is and shall be a third party benefiCiary thereof. Notwithstanding any failure of Contractor to comply with the foregoing sentence, the Port shall be and hereby is deemed to be a third party beneficiary of each such subcontract.

5.13 Port and Surety as Assignees of Subcontracts:

Each subcontract entered into between Contractor and a Subcontractor shall provide that, in the event of a termination of this Contract, such subcontract shall be assignable to the Port andlor the Contractor's surety without the need for any further action on- the part of any party hereto or thereto. Notwithstanding any failure of Contractor to comply with the foregoing sentence. the Port and the Contractor's surety shall be and hereby are deemed to b'"e permitted assignees WIth respect to any such subcontract

General Conditions (Rev'd November 1, 2002) VIII- 32 - 52

OX 0001-1,0215

5.14 Cooperation with the Port Authority and Others=

The principal business of the Port Authority in the movement of cargoes will take precedence over all other considerations in conflicts of scheduling of operations including without limitation those operations of the Contractor. The Contractor shall cooperate with the Port Authority and with other contractors and each will so arrange its schedule such that the entire Work is completed most expeditiously.

The Port Authority shall have the right, but not the obligation, to assist the Contractor and any other party Involved with the Project in scheduling Work.

The Contractor understands and accepts that the Port Authority will have other contractors perfonming Work on the Project or on Port Authority property. The Contractor shall cooperate with the Port Authority and such other contractors and coordinate its Work with the work of other contractors. The Contractor may not make or enforce any claim against the Port Authority for any delay or interference caused by the failure of the Contractor to observe and perform its obligations of cooperation and coordination in accordance with this Section 5.14.

The Contractor shall be responsible for inspecting and accepting the work of any separate Port Authority contractor and determining whether such work its suitable to receive Contractor's Work. The Contractor shall, prior to proceeding with any portion of the Work that requires proper perfonmance of work by other Port Authority contractors, prompUy report to the Port Authority any apparent discrepancies or defects in such other work that would render it unsuitable for such proper performance. Failure of the Contractor to so report shall constitute an acknowledgment that the Port Authority's separate contractor's completed or partially completed work is fit and proper to receive the Contractor's Work. Contractor shall bear the costs of correcting Work attributable to its failure to comply with this Section 5.14, including without limitation any costs associated with design professionals, and shall be liable for all damages caused thereby. If the Contractor causes damage to the work or property of any other Port Authority contractor, the Contractor shall pay for all costs attributable thereto, including without limitation any costs ) associated with deSign professionals, and shall resolve any claims of any such other contractor immediately .

. 5.15 Lines and Grades:

The Port Authority will establish base lines and benchmarks for control with respect to alignment and elevation of Work. The Contractor shall provide and maintain accurate lines and grades at all times. The Port Authority may, but is not obligated te, check t.ines and grades periodically and may pursuant thereto advise the ContraBlor of any errors found, and the Contractor shall immediately correct any such errors; provided, however, that the Cq~lbactOl shall be solely responsible for the accuracy of the Work and its conformance to the Contract Documents.

5.16 Contractor's Superintendent:

The Contractor shall have at all times during which the Work is in progress a competent and reliable English-speaking superintendent on the site. Such superintendent shall be In the dlr~ct employ of the Contractor. No Subcontractor shall perform any Work at the site unless the such superintendent is present. The name, address and home telephone number of such superintendent shall be submitted to the Port Authority in writmg prior to commencement of on-site work. Such supenntendent shall not be changed during the Contract Time without pnor written approval of the Chief Engineer. Contractor shall request such approval by pro"idlng written nolice of its desire to make such change, which notice shall set forth the reason therefor and the name and qualifications of a proposed replacement. The Contractor'S superintendent shall be authOrized to receive nalices' given by the Port AuthOrity, Chief Engineer (or its representative), Design Consultant or the Inspector. Notice given to such superintendent by the Port Authority shall constitute notice to the Contractor.

General Conditions (Rev'd No'vember 1, 2002) VIII- 33 - 52

OX 0001-1.0216

The Port shall have the right to require the Contractor to replace such superintendent, if in the discretion of the Chief Engineer such superintendent is unsatisfadory. Exercise of such right of the Port 10 require the Contractor to replace its superintendent shall not give rise 10 any claim for compensation or damages against Ihe Port or any of its employees.

5.17 Contractor's local Office:

The Contractor shall have an office or agent in the greater Houston area during the period of construction. The mailing address, telephone number and FAX number of this office must be on file with the Chief Engineer prior to the start of any Work.

5.18 ~:

For purposes of the Contract, it is agreed to and understood by the parties that written notice to Ihe Contractor shall be deemed to have been received on the day when such notice is delivered in person or by FAX to the Contractor's superintendent or the Contractor's local office. Notices sent by U. S. mail shall be deemed 10 have been received on the third postal delivery day after the date postmarked on the envelope containing such nolice. "

Notice to the Port Authority shall be ineffective unless given in writing and shall be deemed to have been received on the date it is received by the Chief Engineer (unless the Contract Documents provide that notice be given to another official of the Port in which case such nolice shall be deemed to have been received .on the date it is received by such person). Notice to the Port Authority shall be addressed as foRows:

The Port of Houston Authority ATIN: Chief Engineer (or such other emptoyee of the Port required to be notifIed as provided in the Contrad Documents)

111 E. loop North Houston. Texas 770294327 ")

5,19 Character and Conduct o(Wgrffrntp:

The Contractor shall at all times enforce .strict discipline and good order among its employees and other persons performing the Work and shaD not employ on the Work any person known to be unfit or any person known to be unskilled with respect to the task assigned to him. Only skilled superintendents and workers shall be employed on work requiring special' qualifications and skills. Common laborers are not skilled workers.

The Contractor shall re.move from the site any person who in the discretion of the Chief Engineer commits trespass, is disorderly, works in an unsafe manner, appears to be under the influence of alcohol or drugs, exhibits incompetence or is otherwise unsatisfactory. Such person or persons shall not be employed again on any portion of the Work. Exercise of the Port's rights under this Section 5.19 shall not give rise to any claim for compensation or damages against the Port Authority or any of its employees.

5.20 Drawings and Specifications Furnished by the Port Authority:

The Contractor will be furnished five (5) sets of the Drawings and Specifications at no cost. One complete set of each, including approved Shop Drawings, shall be maintained by the Contractor in good order and condition and the Port shall have constant access to such complete set at the site. If additional copies of the Drawings and Specifications are desired by 'the Contractor, such additIOnal copies will be furnished after reasonable request and the Port's receipt of payment by the Contractor for the cost of reproductIon.

General Conditions (Rev'd November 1, 2002) VIII· 34- 52

OX 0001-1.0217

All Drawings, Specifications, other documents prepared by the Design Consultant, Port Authority, Contractor, Subcontractors, Suppliers, or any other contractor and any copies thereof are and shall remain the Port Authority's property upon creation (collectively, '"Work Product") provided, however, that Work Product shall not include pre-existing proprietary information of the Contractor, its Subcontractors and Suppliers ("Contractor Proprietary Information"). To this end, Contractor agrees and. does hereby assign, grant, transfer and convey to the Port Authority, its successors and assigns, Contractors entire nght, title, interest and ownership in and to such Work Product, including, without limitation, the right to secure copyright registration. Contractor confirms that the Port AuthOrity and its successors and assigns shall own Contractor's right. title and interest in and to, including without limitation the right to use, reproduce, distribute (whether by sale, renlal, lease or lending, or by other transfer of ownership), to perform publicly, and to display, all such Work Product, whether or not such Work Product constitutes a ~work made for hire" as defined in 17 U.S.C. Section 201(b). In addition, the Contractor hereby grants the Port Authority a fully paid-up, royalty free, perpetual, assignable, non-excJusive license to use, copy, modify, create derivative works from and distribute to third parties Contractor Proprietary Information in connection with the Port Authority's exercise of its rights in the Work Product, operation, maintenance, repair, renovation, expansion, replacement and modification of the Project or otherwise in connection with Port Authority property (whether by the Port Authority or a third party). Contractor shall obtain assignments, confirmations and licenses substantially similar to the provisions of this paragraph from all of its Subcontractors and Suppliers. The Work Product is to be used by the Contractor only with respect to this Project and is not to be used on any other project. The Contractor, Subcontractors and Suppliers are granted a limited, nonexclusive, non-transferable, revocable license during the term of their respective agreements under which each is obligated to perform Work to use and reproduce applicable portions of the Work Product appropriate to and for use in the execution of Work. Submission or distribution to comply with official regulatory requirements or for other purposes in connection with the Project and not otherwise in contravention of the Contract Documents is not to be construed as publication in derogation of the Port Authority's copyright or other reserved rights. Contractor shall deliver all copies of the Work Product to the- Port Authority upon the earliest to occur of the Port Authority's request, completion of the Work, or termination of the Contract.

) 5.21 Requests for Information:

/

If the Contractor desires any infonnation or any interpretation in respect of a prOVISion or ,requirement of the Contract Documents, then the Contractor shall prepare an RFI, setting forth in reasonable detail the matters as to which the Contractor desires such information or interpretation, and submit such writing to the Chief Engineer. In situations in which a Design Consultant is utilized for this Project, the Contractor shall send the RFI to the Design Consultant and a copy of the transmittal letter to the Chief Engineer and lri~pector. The Chief Engineer (or Design Consultant, if appropriate) shall review such RFI and issue an answer in response thereto, which response shall be final and conclusive as to the matters addressed. therei{1. .. .

5.22 Submittals to be Furnished by the Contractor after Award:

The Contractor shalt prepare, or cause to be prepared, and submit to the person indicated below for such person's review (which review shalt be conducted with reasonable promptness so as not to delay the Work), complete design and detailed Shop Drawings, Product Data, Samples and other pertinent information showing all Materials and details of Work to be incorporated into the Project. Contractor shall submit such Submittals:

(a) if there is no Design Consultant responsible for checking Submittals in connection with the Work, to the Chief Engineer with a copy of the tra.nsmittalletier transmitted therewith to the Inspector; or • .' .. '

General Conditions (Rev'd November 1, 2002) VIII- 35 - 52

OX 0001-1.0218

(b) if there is a Design Consultant responsible for checking Submittals in connection with the Work, to such Design Consultant with copies of the transmittal letter transmitted therewith to the Chief Engineer and the Inspector.

Submittals of a non-technical nature, such as the Contractor's health and safety plan, spill prevention plan, and appointment of Contractor's superintendent, shall always be submitted to the Chief Engineer or such other individual specified in the Contract Documents as responsible for revieWIng such documents.

Submittals shall be reviewed, approved, checked, stamped wChecked" and signed by the Contractor before being submitted for review as set forth herein. The Contractor snail be solely responsible for the accuracy and correctness of Submittals whether furnished by himself or by others. Contractor's submission of Submittals to the Chief Engineer (or Design Consultant. if appropriate) shall constitute Contractor's representation, with respect to each Submittal, that Contractor has determined and verified all Materials, field measurements and field construction criteria related thereto, that Contractor has checked and coordinated the information contained within such Submittal with the reqUirements of the Work and the Contract Documents, and that such Submittal satisfies all such requirements, No portion of the Work requiring Submittals or any Equipment or Material shall be ordered or fabricated before review of the applicable Submittals by the Chief Engineer (or Design Consultant, If appropriate).

Submission of Submittals shall be made not less than 20 days (or such longer period of time as may be required to maintain the orderly progress of the Work) prior to the time that Contractor expects to incorporate the work- covered' by such Submittal into the Work and in such sequence that the" person . reviewing such Submittals will have the information necessary for such review. The person reviewing Submittals will return them to the Contractor marked to indicate whether the Contractor may proceed with the Work based on the Submittal as is or with specified changes, whether the Contractor must make changes to the Submittal and resubmit It, or whether the Submittal is rejected and the Contractor must submit another Submittal. The review and/or acceptance of any Submittals shall not relieve the \ Contractor of its full responsibility for proper functioning, fit and conformity with the Contract Documents. )

Product Data and Shop Drawings shall be submitted in seven (7) copies, two of which will be _returned to the Contractor. Samples shall be submitted in two (2) copies, one (1) of which will be returned to the Contractor. Prints for field use or fabrication shall be made from the reviewed and accepted Sbop Drawings.

All Submittals shall be made on reproducible paper or in such other medium as will permit clear and permanent reproduction. Each Shop Drawing shall be labeled to show such drawing was prepared by or for the Contracto~ and shall be-identifiable by serial numbers and a deSCriptive title thereon. The seal of a Registered Profession,,!' Engineer, licensed in the State of Texas, shall be affixed to each Shop Drawing when such Shop Drawing reflects an engineering design.

The Contractor shall make the necessary changes on Submittals returned and marked indicating that changes are required and, with respect to such returned Submittals, submit reVised. Submittals for another review following the same procedure as set forth above. The Contractor shall call the reviewer's specific attention to, in a writing attached to or by writing on such resubmitted Submittals, any revisions other than those required by the reviewer pursuant to a prior review.

The time required for revision and/or resubmission of Submittals shall not entitle the Contractor to any extension of time.

Submittals marked indicating that the Submittal is accepted or is accepted with noted corrections may be used for performance of the Work and fabrication pnor to the reviewer's further reView, unless specific instructions are given otherwise by such reviewer. Submittals marked in any other manner,

General Conditions (Rev'd November 1, 2002) VIII- 36 - 52

OX 0001-1.0219

including those indicating that they must be resubmitted for any reason, may not be used for performance of the Work or fabrication prior to the reviewer's further review and acceptance.

The Chief Engineer, Design Consultant and Contractor shall be responsible for obtaining their own copies of Submittals for office andlor field use. The Contractor shall be responsible for furnishing Subcontractors and Suppliers with all Submittals as may be necessary for the coordination of the activities of all Subcontractors and Suppliers.

If at any time before final completion of the Work changes are made that necessitate revising reviewed Submittals, then the Contractor shall make such revisions and resubmit the affected Submittals to the reviewer, following the same procedure set forth above, for additional review, such review to be conducted prior to effecting the changes involved.

Contractor shall maintain at the site one complete set of all reviewed Submittals. The Contractor shall, at the end of the job, make al/ corrections to the tracings or other applicable documentation of its Submittals so that they reflect the finished Work as built and shall deliver to the Chief Engineer either the tracings or reproducible prints thereof on translucent paper.

Submittals are not and, notwithstanding any review and acceptance thereof by the Port or any Design Consultant, shall not be construed to be Contract Documents.

The purpose of review and acceptance of Submittals by the Port Authority or Design Consultant is merely an effort on the part of the Port to determine whether the Contractor is complying with the requirements of the Contract Documents and shall in no way operate as a waiver of any right of the Port or any obligation of Contractor hereunder, nor in any way relieve Contractor of any of its obligations hereunder. Review and acceptance of Submittals is not conducted for the purpose of determining the accuracy and completeness of other details such as dimensions and quantities, or for substantiating instructions for installation or performance of equipment or systems, all of which remain the responsibility of the Contractor as required by the Contract Documents. The Port AuthoritY:; andJor Design Consultant's review and acceptance of the Contractor's Submittals shall not constitute approval of safety precautions or .of any construction means, methods, techniques, sequences or procedures. The Port Authority's and/or .Design Consultant's review and acceptance of a specific item shall not indicate review and approval of an ,~ssembly of which the item is compo~nt.

5.23 As-Built Drawi!!$':

Contractor shall maintain at the site one set of Drawings showing as-built conditions (including without limitation any conditions dls~erl to be at variance with the information as indicated on the original Drawings), JQ~tiQ.ns and details'of any and 'all Work which is installed under this Contract. Such set shall include mar!< ups of the I~test approved Drawings and shall indicate actual locations of utilities and all changes in the Work which occurred during the course of the construction. Two (2) sets of Drawings and Specifications with neat and legible as-built drawings (indicating changes in red) shall be returned to the Chief Engineer within thirty (30) days following the final inspection.

In addition, Contractor shall provide one complete set of white background prints' of all plumbing, mechanical and electrical Drawings, and all other systems requiring concealed piping, conduit or utilities which form a part of the Work. Immediately after such Work is installed, the Contractor shall carefully draw on these prints, in red ink, the as-built condition of any and all Wor!< which is installed under this Contract. In marking such as-built conditions, Contractor shall, indicate by measured dimension to building corners or other· permanent monuments, exact lo~tio~~ ,of all piping, conduit or utilities concealed in concrete slabs, behind walls, within ceilings arbela';" grade. Such prints shall also indicate exact locations of valves, pull boxes and similar items as required for maintenance or repair service.

General Conditions (Rev'd November 1, 2002) VIII- 37 - 52

OX 0001-1.0220

5.24 Progress Photowapt1s:

On the first day or within the first three (3) days of each calendar month, the Contractor shall have taken by a professional photographer four (4) separate photogr' hie views of the Project as directed by the Port Authority's Inspector, which photographic views shall sh:..' the status of the Wor!< as of the dates taken. By the seventh day of that month, two 8 inch by 10 inch enlargements of each such photographic view (for a total of eight (8) such enlargements) shall be delivered to the Port Authority's Inspector. All photographs shall be in color and shall be of high resolution, clarity and sharpness. Such photographs shall be taken by a professional ptlotographer with at least five years of professional experience. The name and address of such photographer shall appear on the reverse side of each photograph. The minimum negative size of such photographs shall be 2% inches by 2% inches. The face of each such enlargement shall be annotated with the name of the Contractor, the name of the Project, the view and the date on which the photographs were taken. The Port Authority shall be the sole judge of the quality of the finished product.

5.25 Additional Schedules and Reports:

The Contractor shall submit to the Chief Engineer sched~des, payrolls, reports, estimates and records, and such other data relating to the Work as the Chief Engineer may from time to time require. Such information shall be submitted in such form and detail as the Chief Engineer may direct.

5.26 Material Storage:

Materials for use in the Wortl shall be stored at the site in such a manner that prevents damage and deterioration. Materials that have been damaged or in any way become unfit for use will not be accepted in the Work.

Materials shall, to the satisfaction of the Chief Engineer, be neatfy, safely and compactty piled or stacked so as to minimize hazard, interference, inconvenience and damage to property owners, users of \ Port Authority property or facilities, Port AUthority employees and the general public. Such ~tacks or piles shall be no closer than three feet from' any fJl"e hydrant and shall not block or interfere with public and .private accessways, drives and streets.

Shade trees, improvements and other structures shall be protected from any damage by personnel, equipment, machinery, stone, earth or other materials. Injuries and damage to accessways, drives, streets improvements or other property must be made good by the Contractor at ils sale expense. Prior to final completiorrof the Work, all unused materials and storage facilities shall promptly be removed by the Contractor.

5.27 Material Furnished by the Port Authorltv:

If any material is to be furnished by the Port AuthOrity, a listing of all such material will be set out in the Special Conditions.

5.28 Tools and Equipment Furnished by the Contractor:

The Contractor shall provide and use approved tools and equipment in sufficient Qualities and quantities to facilitate diligent prosecution of the Work to the end that the Work will be completed within the Contract Time and otherwise in accordance with the Oontract Documents. If at any time the equipment or tools being used, in the opinion of the Chief Engineer, are faulty or inadequate, or will prevent the Wor!< from being completed in accordanCe 'With' the Contract Documents or within the Contract Time, such equipment or tools shall be replaced or supplemented with tools and equipment satisfactory to the Chief Engineer.

General Conditions (Rev'd November 1,2002) VIII- 38 - 52

OX 0001-1.0221

5.29 Water for Construction:

Water for construction purposes mayor may not be available from the Port Authority's fire hydrants. Whether water will be available from such hydrants will be stated in the Special Conditions. If available, Contractor shall use only reasonable amounts and must install a meter. The Contractor shall fumish all temporary connections therefor at its own cost Unless stated otherwise in the Special Conditions, the Contractor shall not be charged for water provided by the Port Authority.

5.30 Electrical Connections:

The Contractor shall make its own arrangements and pay for electrical service at the jobsite unless otherwise stated in the Special Conditions.

5.31 Contractor's Field Office:

The Contractor shall provide a temporary field office building at the site, at a location approved by the Chief Engineer, which building shall be the Contractor's own jobsite headquarters, unless stated otherwise in the Special Conditions. Such building shall be weatherproof and equipped with adequate door and window locks for security of its contents. Such building shall also be equipped with adequate electrical power and illumination, heating facilities, and telephone service. Contractor shall maintain such building in a clean. sanitary and orderly condition throughout. the Contract Time and shall immediately remove such building from the site upon completion of the Work..

5.32 Field Office for Port Authoritv Personnel:

Unless stated otherwise in the Special Conditions, the Contractor shall not be required to fumish a field office for the exclusive use of Port Authority personnel. However. Port Authority personnel shall have the right to use the Contractor's buildings and facilities at the site as needed at no additional cost to the Port Authority.

)

-5.33 Contractor's Obligation to Maintain a Clean Work'Site:

_ The Contractor shall at all times during the Contract Time maintain the site and structures in such a manner that eliminates accumulations of waste materials, debris or rubbish. Prior to final completion of the Work. or such sooner time as may be required by the Port the Contractor shall completely remove from the site all waste matter, rubbish and debris as well as all unused materials, temporary facilities. tools and the like, leaving tt\e area "broom clean."

If Contractor failsJo maintain the site as required and fails to timely complete appropriate clean up and removal activities prior to fioal completion or within twenty-four (24) hours after the Port Authority's direction to do so, the Port Authority shall have the right (but not the obligation) without further notice to the Contractor to periorm such clean up and removal activities at Contractor's expense and to offset, pursuant to Section 6 17, the amount so expended by the Port Authority against any amounts due the Contractor or its surety or recover such amount from either of them.

The Contractor shall ensure that trucks which have delivered materials to the Contractor, including without limitalton concrete trucks, shall be cleaned either: (1) at a location within the site designated QY the Chief Engineer, or (2) off the property of the Port Authority. At a time convenient to the Contractor but prior to final completion, any residue from such cleaning operations shall be completely removed from the property of the Port AuthOrity ... '"

General Conditions (Rev'd November 1, 2002) VIII- 39 - 52

OX 0001-1.0222

5.34 Material Testing:

The testing and inspection of malerials as required by the Specifications, or as deemed advisable / by the Chief Engineer, unless provided otherwise herein, shall be performed by a commercial laboratory hired by and paid directly by the Port Authority.

The Contractor shall cooperate with such laboratory to ensure that all required testing is accomplished without delay to or interference with the Worle The Contractor at its own expense shall provide such laboratory with all test- specimens required by the Contract Documents. The Contractor shall provide the Inspectors with advance written notice of the time and place when all tests and inspections will be performed such that the Inspectors may at their discretion observe such tests and inspections. -

Such laboratory shalf perform tests required for and shall have the power to stop and require correction of concrete work, shall test earth fdl material for compliance with the Specifications and for optimum moisture content, shall make density lests of compacted fill and shall perform any other material tests the Chief Engineer directs. All certificates of such testing, inspection or approvals issued by such laboratory shall be delivered 10 the Inspector with a copy to the Contractor.

The costs of laboratory services required to establish mix deSigns for Portland Cement concrete shall be borne by the Contractor. The Contractor shall pay for the costs of analyzing aggregates, fixing gradations, preparing and testing of design cylinders or specimens and other such services required to establish mix design, or to redesign any mix when required due to any change In source of materials or other conditions.

The expense of tests necessary to qualify welders shall be borne by the Contractor.

5.35 Inspection Required at Stages of Work:

Types of construction work that are performed in stages must be inspected at each stage of such Work. If the Contractor proceeds with such Work without timely calling for an inspection at each such )

stage, the Contractor does so at its own peril and shall be responsible for all costs of every nature ~ attributable thereto, including witha.ut limitation any costs associated with design professionals, and liable for all damages caused, thereby. The Port shall have the right, but not the obligation, to require the Contractor to break out or otherwise uncover any such Work for proper inspection. Repair or replacement of Work uncovered or broken out must be performed <It the sole expense of the Contractor.

5.36 Discovery of latent Defective Work:

No inspection or iesting, failure to inspect or lest, or approval by a laboratory or Inspector shall be construed as an acceptance of defective or nonconforming Work. DefectIve or nonconforming Work shall be rebuilt or properly repaired or replaced at the Contractor's sole cost whenever discovered, whether during the Contract Time or during the warranty period, and the Contractor shall be responsible for all costs of every nature incurred in connection with such discovery, repair and replacement, including without limitation costs associated with design professionals, and liable for all damages' caused by the defective or nonconfonning Work. If the Contractor fails to repaIr or replace such Work, the Port Authority may, but is not obligated to do so, repair or replace such Work and offset the cost and expense of every nature incurred in connection with such repair or replacement, including without bmitation costs associated with design profeSSionals, from any amounts due the Contractor or its surety or recover such costs from either of them.

General Conditions (Rev'd November 1, 2002) VIII- 40 - 52

OX 0001-1.0223

~ 5.37 Test Cuts by the Port Authority:

Prior to Contractor covering any Work, Contractor must provide written notice sufficiently in advance thereof such that the Port shall first have the opportunity (but not the obligation) to inspect such Work prior to such covering; moreover, the Chief Engineer has the right, when it deems necessary, to make test cuts al any place thai the Chief Engineer desires to determine the conformity of materials or workmanship or to check dimensions. If material or workmanship are found to comply with the Contract Documents, the Port Authority will bear all costs incunred by such test cut and test. If material or workmanship is found not to comply with Contract Documents, the Contractor shall bear all cost incunred by such test cut and test and all cost necessary to bring the Work into compliance with the Contract Documents, including without limitation costs associated with design professionals.

5.38 CostS of Inspections by the Port Authority:

All materials furnished and Work performed shall be subject to rigid inspection. The Chief Engineer and the Inspectors shall at all times have access to all parts of any facility where material or equipment is being manufactured. All expenses of inspections perfQrmed more than fifty (50) miles from the Port AuthOrity's Executive Office shall be borne by the Contractor. Wilh respect to trips of Port representatives made by automobile, such trips shall be charged to the Contractor in amounts equal to the maximum amount that an employee the Port Authority would be entitled to be reimbursed by the Port Authority, as permitted by the Internal Revenue Service and then cunrent Port Authority pOlicies, if such employee drove his or her own vehicle. All other costs shiall be borne by the Contractor at the cost thereof plus fifteen (15) percent. The Chief Engineer shall have full control of all matters conceming such inspections and its decision as to such matters shall be final.

5.39 Inspection Outside of Woriting Day:

Whenever the Contractor is permitted to do work at night, on weekends, or on holidays, or is permitted to vary the period during which WorX is nonrnally conducted, the Contractor shall give the Chief Engineer twenty-four (24) hours written notice prior to beginning such Work such that such Work may be Qbserved and inspected. Contractor shall perform such Work. without extra compensation to the _.Contractor and in compliance with regulations fu~hed in writing by the Chief Engineer.

""""5.40 Substandard Material or W9rkmanstpp:

All Work shall be subject to the approval of. ~ Chief Engineer who shall have the right to condemn any part thereof that is not strictly in compliance with the Contract Documents. The Chief Engineer shall have the right to order tI1e removal of any material which in its judgment is not frt to be used in the Work. Immediately upon-the rejection by the Chief Engineer of any material or Work, the Contractor shall remove -Such condemned material or Work from the site, and shall proceed to dismantle the Work rejected, and, solely at Its own expense, replace such Work with Material and workmanship of the quality and character required by the Contract Documents. If however, any defective material or workmanship is incorporated into construction, which defect in itself is not of such a nature as to require removal or reconstruction, the Chief Engineer shall have the right to determine the reduction jn value as is commensurate with the reduction in quality or in workmanship, and, pursuant to Section' 6.17, shall have the right to offset the amount of such reduction against amounts owing to the Contractor or its surety or to recover such amount from either of them

5.41 Changes or Modifications:

The Chief Engineer reserves the right to make sl1ch'tharlges or modifications to the Contract Documents within the general scope of the Work as the Chief Engineer may deem necessary or appropriate and without notice to the surety. The Contractor shall not proceed with such changes without a written Construction Change Directive or fully executed Change Order from the Chief Engineer. Such

General Conditions (Rev'd November 1. 2002) VIII- 41 - 52

OX 0001-1.0224

Construction Change Directives or Change Orders shall stipulate the Work to be performed under the changed, modified or altered conditions, any difference in time allowance and, with respect to Change Orders, any difference in Contract Price, whether such price is increased or decreased pursuant thereto. The Contractor shall under no circumstances have the right to modify the Work to be performed under this Contract, nor shall any claim for extra work be allowed or entertained, regardless of whether such modification would be with respect to Contract Time or Contract Price or both, unless such modification shall have been ordered in the same manner as required in this Section 5.41.

5.42 Claims for Changed Conditions or Contract Interpretations:

Subjeclto the Contractor's representations and warranties set forth in Section 5.53, if oondilions ate encountered at the site that amount to (1) subsurface or otherwise concealed physical conditions that differ materially from those indicated in the Contract Documents or otherwise discoverable by the Contractor from the Contract Documents or a review of the site and surrounding area, or (2) unknown physical conditions of an unusual nature, which conditions differ materially from those originally found to exist at the site and from those normally expected to be inherent in construction activities of the character provided for in the Contract Documents, then the Contractor shall give notice to the Port Authority promptly before such conditions are distUrbed and in no event tater than fM! (5) calendar days after first observing such conditions, If the Contractor believes it is entitled to an adjustment in the Contract Time, Contract Price or both as a result of such conditions, it shall state the basis for the adjustment and the amount of the adjustment in such notice. Any such claim not timely made by the Contractor shall be deemed waived by the Contractor. After receiving such notice the Chief Engineer will promptly investigate such conditions and, if the Chief Engineer agrees with Contractor's assessment of such conditions, the Chief Engineer shall cause an appropriate adjustment (whether an increase or a decrease) to the Contract rime. and will. recommend to the Commission that an equitable adjustment (whether an increase or decrease) be made to the Contract Price. If the Chief Engineer determines that the conditions at the site are not materially different from those indicated in the Contract Documents and/or that no change to the terms of the Contract is justified. !he Chief Engineer shall so notify the Contractor and such determination by the Chief Engineer in this respect shall be final and conclusive.

If the Contractor believes that· any interpretation of the Contract Documents by the Inspectors, Chief Engineer or other agent of the Port Authority constitutes a change to the Contract. the Contractor shall immediately notify the Chief Engineer in a signed writing, and in any event such notice shall be ,. given within five (5) calendar days' after such interpretation. If the Contractor believes it is entitled to an adjustment in the Contract Time, Contract Price or both as a result of such "interpretation, it shall state the basis for the adjustment and the amount of the adjustment in such notice. IN NO EVENT SHALL CONTRACTOR BEGIN~ PERFORMING THAT PORTION OF THE WORK AFFECTED BY SUCH INTERPRETATION PRIOR TO GIVING SUCH WRITTEN NOTICE TO THE CHIEF ENGINEER. Any notice not timely made by the ContraCtor shall be deemed a- waiver by the Contractor of its right to assert a claim in res~ct ·of "'such interpretation. The Chief Engineer will promptly conduct an investigation pursuant to such notice and, if the Chief Engineer agrees that such interpretation is a change which will necessitate a modifICation of the Contract, the Chief Engineer will determine whether to proceed with such interpretation and, if so, issue a Construction Change Directive or recommend to the Commission an equitable adjustment to the Contract Price, as applicable. If the Chief Engineer determines that such interpretation does not necessitate a modifICation, the Chief Engineer shall so notify the Contractor and the determination by the Chief Engineer in such respect shall be final and conclusive.

5.43 Calculations of Costs of Changes or Modifications:

If any changes or modifications are ordered pursuant to Section 5.41 or allowed due to changed conditions or Contract interpretations pursuant to Section 5.'12, or if extra costs are incurred in connection with suspension of Work ordered pursuant to Section 5.49, incurred in connection with acceleration of Work ordered pursuant to Section 5.50 or otherwise incurred and allowed In compliance with the Contract Documents, such changes or modifications shall be paid for on the basis of the Chief Engineer's

General Conditions (Rev'd November 1, 2002) VIII· 42 - 52

OX 0001-1.0225

computation of the increase or decrease attributable thereto to the aggregate of labor, materials and equipment rental in the performance of the WorK. Such computation by the Chief Engineer in this respect shall be fina! and conclusive. If the Contractor desires to make any claim for compensation in addition to the amount so computed by the Chief Engineer, such claim must be made in a Signed writing within five (5) calendar days after the Contractor is informed of the Chief Engineer's computation. Any daim not so timely made by the Contractor shall be deemed waived by the Contractor.

Deductions from or additions to the Contract Price shall be determined by one of the follOWing methods: .

Method A By computation based upon an agreed unit price if a unit price for such Work is not included in the original BidlProposal; or

Method B By computation based upon an agreed lump sum; or

Method C If neither Method A or B are agreed upon before extra Work is commenced, then the Contractor shall be paid the "actual field cost" of the Work (with respect to such cost the Port shall be entitled to conduct an audit pursuant to Section 6.16), piUS a ten percent (10%) mark-up.

The Chief Engineer may specify the form in which accounts of the -actual field'cost" shall be kept and furnished to the Port Authority. The Chief Engineer may set prior limitations on the type and kind of machinery and equipment to be used, in the absence of which limitations such matters shall be determined by the Contractor.

5.44 Umitations on the Costs of Changes or Modifications:

The original Contrad Price may not be increased by more than twenty-five percent (25%) or . decreased by more than eighteen percent (1 B%) without the consent of the Contractor. The execution of j3 Change Order by the Contractor for. amounts in excess of such limitations shall constitute consent.

5.45 Intellectual Property Rights:

If the Contractor I.lses any design, material, or process covered by trade secrets, letters patent or copyright of any third party, the Contractor shaD lawfully acquire the nght to such use from the appropriate owner thereof. Pursuant.. to Section 3.08, the Contractor shall indemnify and save harmless the Port of Houston Authority from any and all claims of infringement brought by any third party based upon. arising out of or relating to any such use.

5.46 Partial Utilization by the Port Authority:

Acceptance or use by the Port Authority of any part of the Work which (a) has specifically been identified in the Contract Documents as constituting or, (b) the Port Authority anc the Contractor agree constitutes, a separately functiomng and usable part of the Work which part can be used by the Port Authority fo~ its intended purpose without significantly interfering with the Contractor'S performance of the remainder of the Work, meW occur pnor to final completion. Such acceptance or usage shall not be cause for any partial release of retainage. " .

General Conditions (Rev'd November 1, 2002) VIII- 43 - 52

OX 0001-1.0226

5.47 Tennination for Convenience of the Port of Houston Authority:

The Port of Houston Authority may terminate this Contract at any time without cause by written notice to Contractor. Upon receipt of such notice, the Contractor shall immediately stop all Work. Within thirty (30) calendar days after receipt of such notice, the Contractor shaR submit a statement showing, in the form normally required for applications for payment or such other form required by and in a degree of detail satisfactory to the Chief Engineer, the Work property in place and performed under the Contract to the date of termination. The Port Authority shall then pay the Contractor that proportion of the Contract Price which the properly performed rn place Work bears to the total Work called for under the Contract, less any payments previously made and less any costs of any nature whatsoever, including \Whout limitation costs associated _with design professionals, to the Port Authority associated with any defective or improper Work by the Contractor or other damages to the Port Authority for which the Contractor is liable. This is the only compensation to which the Contractor is entitled upon termination for convenience by the Port AuthOrity. The Contractor shall ensure that all subcontracts contain a similar termination provision. The Contractor is hereby advised and agrees that the Port Authority will not pay and will not be required to compensate the Contractor for any loss of profits, loss of work, termination or additional payment to Subcontractors or Suppliers, or any other damage or out of pocket costs incurred or resulting from such termination and that no payment will be made by the Port for any portion of the Work not in place or not in strict compliance with the Contract Documents or materials (ordered, delivered, on hand, or otherwise) not incorporated into the Work. In the event the amount due the Contractor is less than the amount the Port Authority is entitled to deduct from such payment, the Contractor shall pay the Port Authority the difference.

5,4$ Termination for Cause:

The Port Authority may. in the event of: (i) failure of the Contractor to perform in accordance with the terms of the Contract Documents, or (ii) insolvency of or filing of bankruptcy or commencement of bankruptcy proceedings by or against the Contractor, tenninate this Contract. Upon the occurrence of one or both of such events, the Port Authority may. upon one (1) days' written notice to the Contractor, terminate, in whole or in part, the Contractor's right to continue With performance of the Contract or the Contract itself, In either instance, the Port Authority shall not be obligated to complete the Contract. If {he Port Authority exercises such right of termination, the Port Authority shall have the right, but not the - obligation, to (;) make demand upon the surety of the'.Contractor'& performance bond to complete the Contract, or (ii) elect to complete the Contract itself or haw it completed by another contractor. If the Port Authority so makes-demand upon the surety, the surely shall have the right and privilege, within sellen (7) calendar days after receipt of written notice from the Port Authority making such demand, to assume control of the Contract and all Work performed thereunder and thereafter and to sublet or complete the Work in strict conformity with the Contract. Failure of the surety to do so within such seven (7) calendar days will result in an'immediate forfeiture of all rights under such surety's bond and otherwise at law, in which event the Port Authority shall have the right to take the prosecution of the Work out of the hands of the Contractor and such surety and to appropriate or use any or all Materials and Equipment as may be suitable and acceptable, and enter into an agreement for the completion of the Contract according to its terms and provisions or to use such other methods as in the Port Authority's opinion may be required or desirable for the completion of the Work. Under no circumstances shall the Port Authority_ be obligated to let all or any portion of the incomplete Work for rebid.

All costs incurred by the Port Authority in terminating pursuant to this Section 5.48, including without limitation any costs associated with design profeSSionals, court costs, attorneys' fees and experts' fees, together with the costs of completing the Work, shall be"deducted from any money due or which may become due to the Contractor or its surety. If such ,?,sl.i~ less. than the sum which would have been payable under the Contract had it been completed by the Contractor, then the Contractor or its surety shall be entitled to receive the difference. If such cost exceeds such sum, then the Contractor and its surety shall be liable 10 and shall pay Ihe Port of Houston Authority the amount of such excess. If the Port Authority elects to complete the Contract. regardless of whether the surety or the Port Authority is

General Conditions (Rev'd November 1, 2002) VIII· 44 - 52

OX 0001-1.0227

responsible for completing the Contract, neither the Contractor nor its surety shall be entiUed to any further payment until the Work has been finally completed and finally accepted by the Port Authority.

5.49 Right of Port Authority to Suspend the Work:

The Port Authority may at any time, with or without cause, suspend performance of all or any portion of the Work by giving Contractor written notice specifying which portion of the Work. is to be suspended and the effective date of such suspension. Contractor shalt continue to diligently perform any remaining Work. that is not suspendectand shall take all actions necessary to maintain and safeguard all materials, equipment, supplies and Work in progress affected by the suspension.

In the event of suspension for convenience of the Port Authority. the Contractor shall be entitled to additional compensation as follows:

(a) Extra costs determined in accordance with Section 5.43 which are incurred by Contractor, its Subcontractors and Suppliers as a result of continuing to maintain dedicated personnel. materials and equipment at the. Site at the Port Authority's request during any suspension period, including for the purpose of safeguarding all material. equipment, supplies and Work in progress; and

(b) Other reasonable and unavoidable extra costs determined in accordance with Section 5.43 which are direcUy related to any subsequent re-mobilization of the suspended Work.

Payment of such additional costs shall be full and complete compensation for the suspension and Contractor shall not be entitled to payment of any additional costs or damages associated with such suspension.

5.50 Right of Port Authority to the Accelerate Work:

In the event the Port Authority desires to accelerate the Work from the latest approved Schedule -for reasons other than delays caused by or attributable to the Contractor, Owner shall so notify the . Contractor in writing. Upon receipt of such written instruction: Contractor shall require its personnel and jts Subcontractors and Suppliers to ¥IOrX such overtime hours and/or to increase their respective work forces as may be reasonably necessary to meet the Port Authority's acceleration goals. In the event such an acceleration is ordered by the Port Authority, the Contractor shall be entitled to an adjustment in the Contract Price to the extent of thE! Contractor's extra ,costs as determined in accordance with Section 5.43.

5.51 Protection ilqai!1st Claims of Subc9ntractOFS, Laborers, Materialmen and Furnishers of Machinery, Eguipment and Supplies:

Pursuant to Section 3.08, the Contractor shall indemnify and save hannless the Port Authority Indemnitees from aU claims arising out of related to or connected with the demands of Subcontractors, Suppliers. laborers. workmen. mechaniCS. materialmen and furnishers of machinery and parts thereof, equipment. power tools and all supplies incurred in the performance of the Contract. When requested by the Port Authority. the Contractor shall furnish evidence satisfactory to the Port Authority that any or all obligations owing to any of the foregoing have been paid. discharged or waived.

5.52 Allegations of Change or Waiver of Contract Terms:

Any claim by the Contractor that any terms or conoitio'ns of the Contract Documents have been changed or waived must be evidenced by an agreement in wribng approved and signed by the ChIef Engineer.

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OX 0001-1.0228

5.53 Warranty:

Notwithstanding any provision in the Contract Documents to the contrary, the Contractor shall be obligated to replace or correct, without cost to the Port of Houston Authority, any Work which is improperly performed. defective or not in full compliance with the Contract Documents for a minimum of one year after final completion upon receiving notice thereof from the Port. When performing such replacement or correction Contractor shall also make good all damage to other work caused by such replacement or correction and be liable for all costs of every nature associated therewith, including without limitation costs associated With design professionals. If the Contractor fails to replace or COITect the Work, the Contractor or its surety shall reimburse the Port Authority for all costs and damages of every nature incurred by the Port Authority in connection with such replacement or correction, including without limitation costs associated with design professionals, or the Port Authority may elect to offset all such costs and damages against any amounts due the Contractor or its surety.

Additional warranties for specifIC items may also be required by the SpecifICations. The Contractor shall submit such warranties to the Port Authority for its approval before final payment will be made to the Contractor. Such warranties shall be assigned to the Port Authority.

'-

The Contractor shall supply the Port Authority with original copies of all warranties made to the Contractor by Suppliers or Subcontractors and shall assign such warranties to the Port Authority. Such assignments will not relieve the Contractor of its responsibility in case of a Supplier's or Subcontractor's failure to fulfill its warranty obligations. If the Contractor is prevented for any reason from making any such assignment. the Contractor hereby consents to the Port Authority's enforcing any and all such nonassignable warranties in'the Contractor's name and the Contractor agrees that the Port Authority shall be entitled to any benefits derived therefrom without the need for any further action on the part of either the Contractor or the PorL

This Section 5.53 shall not be construed to limit any other obligations of Contractor pursuant to this Contract, which obligations by their terms are intended to be binding for periods or time longer than those of the warranty periods set forth in this Section 5.53. For the avoidance of doubt the warranty periods set forth \ in this Section relate only to the specific obligation-of the Contractor to replace or correct the Wort and have i no relationship to the time period during which the Contractor shaH be obligated to comply with its other obligations under the Contract Documents. With respect to such other obligations, the Contractor agrees ,- that the Port may seek to enforce this Contract or establish Contractor's liability with respect thereto for as long as permitted by this Contract or Applicable UIw.

The Contractor..covenants, represents and warrants that it will perform the Work. in accordance with its Standard of Care. The Contractor represents and warrants to the Port Authority that all items of the Work: (a) are merchantable, sate, and fit for-their intended purpose; (b) are new and of good quality, and free from· alI "dele.cts in workmanship and materials; and (c) conform to all Submittals and requirements, provisions, and special instructions in the Contract Documents: The Contractor shall reperforrn any Work or portion thereof which failS to satisfy the Standard of Care or the warranties of the foregoing sentence, such that after such reperformance such Work or portion thereof satisfies the Standard of Care and such warranties. All costs incurred by the Contractor or the Port Authority, including without limitation all costs aSSOciated with design professionals, in connection- with any such reperforrnance shall be at the Contractor's soie expense. If the Contractor is either incapable of reperforming such corrections or incapable of performing such corrections in time to meet any requirements of the Port Authority, the Port Authority may have such Work. reperformed by a third party, and the Contractor or its surety shall reimburse the Port Authority for the expense of such reperforrnance, including without limitation all costs associated with design professionals, or the Port Authority may offset such expenses from any amount due the Contractor or its- surety:' .

5.54 Progress Meetings:

General Conditions (Rev'd November 1, 2002) VIII- 46- 52

OX 0001-1.0229

Contractor shalf schedule and conduct progress meetings on a regular basis during which meetings the Port Authority, Design Consultant, Contractor and Subcontractors may discuss such matters as Work procedures, progress, scheduling and coordination. Contractor shall prepare in advance of each such meeting a written agenda outlining the topics of discussion for such meeting and shall distribute copies thereof prior to the beginning of each such meeting. Contractor shalf be responsible for taking accurate notes reflecting, to the satisfaction of the Port, the minutes of such meetings and, within two (2) working days after each such meeting, Contractor shall distribute to the Port Authority, Design Consultant and any other attendees of such meetings, copies of such minutes, which shall at a minimum include a list of resulting action items, responsible parties and dates necessary to timely complete such action items such that the Contractor maintains the progress of the Work in accordance with the latest approved Schedule.

5.55 Dispute Resolution, Submission to Jurisdiction, Waiver of Right to Remove and Venue:

In the event of any dispute connected to, arising out of or relating to the implementation of or performance of this Contract which the Port and Contractor have been unable to resolve within thirty (30) days after such dispute arises, a senior representative of the C.ontractor shall meet with the Chief Engineer at a mutually agreed upon time and place not later than forty~five (45) days after such dispute arises to attempt to resolve such dispute. In the event the Chief Engineer and senior representative of the Contractor are unable to resolve any such dispute within frfteen (15) days after such meeting, either party may, by written notice to the other, submit such dispute t.o non-binding mediation before a mutually agreeable mediator. If the parties are unable to agree upon a mediator within twenty (20) days after such written notice of submission to mediation, the American Arbitration Associatio.n shall be empowered to appoint a qualified mediator. If the dispute is technical in nature, the mediator appointed by the American Arbitration Association shall be qualified by at least ten (10) years experience in construction, engineering, andfor port operations. The mediation shall be conducted within thirty (30) days of the selection or appointment of the mediator, as applicable. The parties shall share the mediator's fee and any filing fees equally. The mediation shall be held at a mutually agreeable location in Houston, Texas. If the parties are unable to agree upon a location, the mediation shall be held at the offices of the American Arbitration Association in Houston, Texas. Participation in non~binding mediation in accordance with this paragraph - shall be a condition precedent to Contrador having the right to file any legal or equitable action against the . .. Port Authority or any of its commissioners, officers, directors, empioyees or agents.

Subject to the Contractor's obligation to comply with the requirements of the foregoing paragraph as a condition precedent to the Contractor having any right to file any legal or equitable action against the Port Authority or any of its commissioners, officers, directors, employees or agents, for purposes of all legal or equitable proceedings arising out of, relating to or connected with this Contract, the Contractor hereby agrees that this Contract is pecformable in whoIe·or injlart in Houston, Harris County,· Texas, and hereby submits·to the.iurisdiction of lhe state coUrts within Houston, Harris County, Texas, and agrees that such jurisdiction shall be excl!Jsive with respect to any such proceeding filed by Contractor. For the avoidance of doubt the Contractor hereby expressly, clearly and unequivocally agrees that the Port has the right to choose the forum in which any legal or equitable proceeding arising out of, relating to or connected with this Contract shall be heard; and, having so agreed, Itle Contractor hereby irrevocably waives its right to remove any such proceeding to any federal court should the Port chQOse: to bring any proceeding in any state court of Texas. Furthermore, to the fullest extent permitted by law, Contractor hereby irrevocably waives any objectiOn which it may now or hereafter have to the laying of venue of any proceeding arising out of, relating to or connected with this Contract in any state court residing in Houston. H.arris County. Texas. Finafty, Contractor hereby irrevocably waives any claim which it may now or hereafter have that any such proceeding brought in any state tourt in Houston, Harris County, Texas, has been brought in an inconvenient forum.

END OF GENERAL CONDITIONS SECTION 5

General Conditions (Rev'd November 1,2002) VIII - 47 - 52

OX 0001-1.0230

SECTION 6. PAYMENT \ 5.01 Schedule of Costs: )

The Contractor, after being notified of award of the Contract and before commencing any Work, shall submit to the Chief Engineer a schedule in such form as required by the Port Authority allocating the Contract Price to the various items of the Work. For Contracts on a unit price basis such schedule shall show quantities of materials, items of machinery and equipment. and other items which are to be incorporated into the Work and stia11 reflect the cost to install each such it~ in place. Such schedule shall be in a degree of detail acceptable to the Port and the costs reflected therein shall be substantiated by estimates of the Contractor prepared for its BidlProposal and shall reflect such other data as the Port Authority may request. Upon approval by the Chief Engineer, such schedule (the ·Schedule of Costs") shall be the basis for the preparation and submission of monthly estimates.

The Port Authority reserves the right to reject all or any portion of the Schedule of Costs which does not accurately reflect the Work in reasonable detail or does nol accurately reflect an appropriate cost, allocation or proportion of the Work. No Schedule of Costs ¥VIll be approved if it is unbalanced or fronl end loaded. The cost of bonds and insurance shall not be listed therein as a separate item, but rather shall be spread over all units of Work. If a Schedule of Costs has been initially approved and subsequenUy used, but later found improper for any reason, sufficient funds shall be withheld from future billings to ensure an adequate reserve (exclusive of normal r~tainage) to complete the Contractor's Work.

6.02 Progress Payments:

One month after commencement of fteld construction the Contractor shall estimate the value of Work performed as of that time using as a basis therefor the Schedule of Costs and approved pursuant to Section 6.01. If the method of payment for the Contract is lump sum or partial lump sum, the Contractor's invoice shall reflect the percentage of completion in place of such lump sum Work. The Contractor shall have no right to request payment for any Work prior to actual in place performance thereof nor shall the Contractor have the right to invoice the Port any more frequently than once per month. In connection with each invoice, the Contractor shall provide to the Port Authority, and such other persons as the Port Authority may designate, a copy of certified payrolls as set forth in Section 6.08 and a certificate to the ,- effect that:

(a) the Work is progressing In accordance with the latest approved Project Schedule (except as set forth in such certificate);

(b) the qualily of all Wotk performed and inctuded in such invoice is in compliance with the ·terms of the ContracfDocuments;

(c) the Contractor is entitled to payment of the amount requested on such invoice; and

(d) the Contractor has paid, in accordance with Applicable Law, the applicable Subcontract, and the Contract Documents, all Subcontractors and Suppliers for W.ork previously invoiced, and the Work which is covered by such invoice and all Wort< which is covered by previous invoices is free and ctear of all liens.

The Contractor shall provide with each invoice the waivers and releases of liens required pursuant to Section 6.07 and such other information as reasonably required by the Port Authority.

... ~"

6.03 Inspector's Approval of Billings:

Prior to submitting each esllmate for the purpose of substantiating any partial payment, the Contractor shall submit a proposed invoice to the Inspector for preliminary approval. The Contractor

General Conditions (Rev'd November 1,2002) VIII - 48 - 52

OX 0001-1.0231

understands and agrees that such monthly estimates will be approximate only and that the Port will make no attempt to verify exact measurements or quantities therein. As such, such preliminary estimates even if approved by the Inspector are not binding on the Chief Engineer or Port Authority and any invoices or payments based on such preliminary estimates are subject to adjustment and correction as set forth in the Contract Documents.

6.04 Nonpayment for Unincorporated Material and Work Not in Place:

The Port Authority will make no partial payments for Malerial or Equipment not incorporated into the Work, even tf such Material or Equipment is stored at the site, and no partial payment will be made for specially.fabricated material unless and until it is incorporated into the Work. Similarly, the Port Authority will make no partial payments for Work not physically in place at the site. including without limitation Work associated with submittals. subcontractor oversight. and the like. Exceptions to this rule, if any, will be noted in the Special Conditions.

6.05 Right to Withhold:

The Port Authority shall have the right but not the obligation to withhold all or any part of payment requested on any invoice to protect the Port Authority from loss because of:

(a) Work that is defective or not in complete compliance with this Contract when such Work has not been remedied pursuant to this Contract;

(b) any failure of the Contractor to perform Work in accordance with the provisions of this Contract;

(c) third party suits, stop notices or liens for which the Contractor is responsible pursuant to this Contract, including without limitation pursuant to any indemnification obligation hereunder, asserted or filed against any Port Authority Indemnitee or the Work., the site or ) the Project, or any portion thereof;

(d) uninsured damage to the Port Authority, any Subcontractor, Supplier or Port Authority Indemnitee which rest,dts from the Contractor's failure to obtain or maintain the insurance required by this Contract or from any action or inaction by the Contractor or any Subcontractor or Supplier which excuses any insurer from liability for any loss OLclaim which would. but for such action or inaction, be covered by insurance;

(e) failure of the Contractor to pay any Subcontractor or Supplier, or of Contractor to ottterwlse.,pay for any labor, materiafs or equipment;

(f) any other damage to the Port Authority, including. without limitation. any additional costs associated with design professionals;

(g) failure of the Contractor to submit proper invoices with all required attachments and supporting documentation; or

{h} failure of the Contractor to comply with any requirement of the Contract.

6.06 Overpayment for Defective or ~ver Estimated Work:

If investigation or inspection reveals that any Work' wa~ not performed in compliance with the Contract Documents. and either (i) the value of such Work was included in the current or a prior monthly estimate or (ii) such Work was previously paid for by the Port Authority. then the Contractor shall not include the value of such Work in any subsequent estimate or be entitled to any further payment therefor

General Conditions (Rev'd November 1,2002) VIII- 49- 52

OX 0001-1.0232

~!)

and the Port Authority shan be entitled to withhotcf payment therefor from any payment due from the. Port Authority to the Contractor or its surety.

6.07 Contractor's Submittal of Affidavit:

As a condition precedent to the obligation of the Port Authority to make payment on any invoice.

the Contractor shall supply the Port Authority with waivers and releases of liens (including without limitation all mechanics' and materialmens' liens and any other type of security interest) in the form acceptable to the Pori Authority. whlch waivers and releases shaH be duly executed and acknowledged by the Contractor and each Subcontractor and Supplier expecting payment from Contractor· in respect of such invoice in order to assure an effective release of all such liens to the maximum extent permitted by Applicable Law. The waivers and releases of liens shall provide. at a minimum, that all amounts due and payable to the Contractor and each such Subcontractor and Supplier. as of the date of suCh invoice and as of the date of the last payment received by the Contractor and each such Subcontractor and Supplier. as applicable, the Contractor and each such Subcontractor and Supplier have been paid in full and that the Contractor and each such Subcontractor and Supplier waives, releases and relinquishes any lien (including without limitation any mechanic's or materialman's lien). security interest and claim for payment to the extent set out in the preceding sentence.

The Contractor shall submit with its final invoice the Port Authority's standard affidavit in respect of final payment for the Contractor and each Subcontractor and Supplier which sets out the amount of the final payment and acknowledges that such payment is full and final payment. provides that the Contractor and each Subcontractor and Supplier releases the Port Authority from any and all present or future claims against the Port Authority and provides that the Contractor and each Subcontr.lctor and Supplier has fully paid all financial obligations in connection with the Project.

6.08 Supporting Documents for Progress Payments:

All documents required by the Contr3d.to be submitted with each inwice including, without limitation, certified payrolls of Contractor's employees and documentation evidencing appropriate insurance coverage shall be. and each· must indicate on its face that it is. effective through the invoicing . period with respect to which the Contractor is requesting payment. The Port Authority shall have no _ obligations to make any or all progress payments untiI1heContractor meets this requiremenl

6.09 Final Inspection by the Contt1lctor.:

On final complE!tion of the Contract. all portions of the Work must be carefully reviewed and inspected by the Contractor persooally and by the own..er(s) or principal(s) thereof (or functional equivalent thereof) and-!he chief execiJtive officer lhereof (or functional equivalent thereof). Such persons shall satisfy themselves that every item of the Work is finally completed and all defects have been made good, and that all surplus materials, refuse, dirt and rubbish have been cleaned up and removed from the site or properly disposed of, and that the entire Work is in a finished, satisfactory and neat condihon, and ready in all respects for final acceptance by the Port Authority.

6.10 Final Inspection by the Port Authority:

After written certification by the Contractor to the Port Authority that all of the terms and conditions of the Contract have been completely fulfilled and the Work is finally complete, the Port Authority shall make its own inspection and shall determine the' status of the Work. For Projects with a Contract Pnce based on unit costs, the Port Authority s~all; d.e~rmine the actual fmal quantities of the Work and give to the Contractor a copy of such final quantities at which time the Contractor shall revise Its Schedule of Costs accordmgly and resubmit such revised Schedule of Costs to the Port with the Contractor's final invoice.

General Conditions (Rev'd NOllember 1,2002) VIII· 50- 52 )

OX 0001-1.0233

6.11 A Finding of Incomplete Work:

If inspections by the Port Authority pursuant to Section 6.10 reveal that the Work is inC{)mplete or lacking in any manner, the Port shall prepare a ·punch list" and the Contractor shall immediately cure all deficiencies itemized therein without delay. No final invoice shall be submitted to or approved by the Port Authority until all such punch list items are cured by the Contractor and approved by the Port Authority.

6.12 Conditions to Final Payment:

As a condition precedent to the Contraclor having any right to receive, and to the Port having any obligation to pay, final payment, all requirements in the Contract Documents for final payment must have been met by the Contractor. Such requirements include, but are not limited to, the following:

(a) all ·punch list" items must have been cured to the satisfaction of the Port;

(b) as-built drawings must have been delivered to the Port;

(c) all warranties in respect of Work performed by Subcontractors or Suppliers shall have been assigned to the Port;

(d) aH lien releases and waivers shall have been de.livered to the Port;

(e) operation and maintenance manuals shall have been delivered to the Port; and

(f) all other requirements of the Contract Documents shall have been met.

6.13 Payment and Retainage:

'\ Payment of the Contract Price and payment of the value, net of credits, pursuant to any Change I Orders, constitutes full compensation to the Contractor for the performance and completion of the Work and the performance and observance by the Contractor of its obligations under this Contract, except to the extent otherwise stated expressly in this Contract Based on the monthly estimates approved by the Djrector of Facilities for the Port Autbority, the Port shall withhold five (5) percent of each approved ., invoice, and such retalnage shall apply notwithstanding any Change Orders. The Port Authority shall have the right to retain-the last fNe (5) percent of monies earned under the Contr-act until the terms and conditions of the Contract are completely met and final acceptance of the entire Project is achieved.

6.14 ntle to Work:

Title to all Work, Malenals Clnd Equipment covered by each application for paymenl shall pass 10 the Port Authority no later than the time of payment therefor. Notwithstanding the passage of title. risk of loss or damage shall remain with Contractor untit the Port Authority finally accepts the Work.

6.15 Payment Not Waiver or Acceptance of Work:

No payment made by the Port Authority pursuant to this Contract shall constitute a waiver of any claim or right (including WIthout limitation claims or nghts of the Port in respect of warranty nghts or indemnification obligations of the Contractor) the Port Authority may have against the Contractor, any Subcontractor or Supplier at that time or thereafter. No payment made by the Port Authority under this Contract shall be considered or deemed to represent that the Po.!'! fo..uthority has inspected the Work or in any way checked the quality or quantity of the Work or that fhe Port Authority knows or should know or has ascertained how or for what purpose the Contractor has used sums previously paid to it by the Port Authority. nor shall any such payment be deemed to be or construed as an approval or acceptance of any Work or as a waiver of any claim or fight the Port AuthOrity may have under thIS Contract All payments

General Conditions (Rev'd November 1, 2002) VIII· 51 - 52

OX 0001-1.0234

(including without limitation final payment). withholdings and offsets shall re subject to correction and adjustment in subsequent progress reviews and payments or by offset or withholding.

6.16 Right to Audit:

If the method of payment of the Contract or any portion thereof is one other than lump sum (e.g.• unit price or cost plus). then the Port shall have the right, but not the obligation. to audit, during business hours upon reasonable notice to Contractor, the Contractor's books and records, induding without limitation any documentation which-proves to the reasonable satisfaction of the Port the Contractors actual cost of pay items. Without limiting the foregoing. the Port shall also have the tight to request that the Contractor provide such information to the Port upon the Port providing a notice to the Contractor requesting such information and in such event the Contractor shall be obligated to provide such information to the Port within two (2) working days of the Port making such request.

6.17 ~:

The Port Authority, without waiver or limitation of any of its other rights or remedies under this Contract and Applicable Law, shall have the right but not the obligation to from time to time deduct from any amounts due or owing by the Port Authority to the Contractor or its surety any and all amounts owed by the Contractor or its surety to the Port Authority.

END OF GENERAL CONDITIONS SECTION 6

END OF GENERAL CONOInONS

IOOI19!U·DOC

General Conditions (Rev'd November 1, 2002) VIII- 52 - 52

OX 0001-1.0235

TAB 14

Contract, Technical Specifications, Section 02161 Trench Excavation and Shoring Safety Plan (DX1-1.0324-29)

J:'UKI Vi- HUU~ 101"· .',) 1 HOKll Y ll:Cr~ ILAL ~l"'t:.Llr lLA J lUN~

BAYPORTTERMIl't ~LEXPHASE lA T~· -.LH EXCAVATION AND '- o::>HORlNG S_-\FEn- PLA.)"!

SECTIOI\' 02161 TRENCH EXCA \'ATION AND SHORING SAFETY PLA~

PART 1 GENERAL

1.1 SECTION INCLUDES

Subject to the General and Special Conditions, this Section includes the furnishing of a Trench Excavation and Shoring Safety Plan, including detailed plans and specifications for a trench safety system and requirements for a safety program for the trench system (including a plan for ingress and egress of the trenches, manholes and structures), to be incorporated into the bid documents and the Construction Contract, and all labor and materials for installation, inspection, and maintenance of trench safety system.

B. Application

For any trench excavation at a depth of 5 feet or greater, provide a trench safety system. Trench safety system is not required when (a) CO!\.'TRACTOR's geotechnical engineer detennines that the trench excavation is to be made in stable rock; or (b) excavations are less than five (5) feet in depth and examination of the ground by a competent person on behalf of the CONTRACTOR provides no indication that a cave-in should be expected. TTench safety system to be in ) accordance with details shown on CONTRACTOR's Trench Excavation and !

Shoring Safety Plan.

c. Modifications _

All modifications to the COl'lJRACTOR'S Trench Excavation and Shoring Safetv.... Plan or the detailed plans and specifications necessitated by the site conditions, CONTRACTOR'S trench construction means, methods, techniques or procedures and CONTRACTQR'S equipment to be used in construction of jlrojict facili~ies to be submitted to the Chief Engineer. All such modifications to be signed and sealed by a Registered Professional Engineer licensed in the State of Texas and a statement provided stating that the modified plan and/or the modified detailed plans and specifications for the trench safety system are deSigned in compliance with the Contractor's Standard of Care and is in confonnance with appropriate OSHA standards. Such modifications to CONTRACTOR'S plan and/or the CONTRACTOR'S detailed plans and specifications for the trench safety system to thereafter be incorporated into the Construction Contract.

... ~" • r •

Ilf07/02 C70-1A-SOI-O-02161 - 1

OX 0001-1.0324

PORT OF HOUSTON Ap-rl-iORITY 11::...... t1N~\ .... L ~rr:.Ll["l'-rt 1 iv,'" BAYPORT TERMINI\.. \...._ )FLEX-PHASE lA - . - '. )~XCA V ATION AND ~vRING SAfETY PL>\N.

1.2 REFERENCES

The publications listed below fonn a part of this specification to the extent referenced. The publications are referred to in the text by basic designation only.

AMERICAN SOCIETY OF TESTING AND MATERIALS (ASTM)

, ASTM A36/A36M 1997 Standard Specification for Carbon Structural Steel

ASTM AJ07 1997 Revision A-Standard Specification for Carbon Steel Bolts and Studs, 60,000 psi Tensile Strength

ASTM AJ28/A328M 1996 (REV) Standard Specification for Steel Sheet Piling

ASTM A5721A572M 1997 Standard Specification for High-Strength Low-Alloy Columbium-Vanadium Steels of Structural Quality

ASTM A588/A588M 1997 Standard Specification for High-Strength Low-Alloy Structural Steel With 50 ksi (345 MPa) Minimum Yield Point to 04 in. (100 mm) thick

ASTM A690/A690M 1994 Standard Specification for High-Strength Low-Alloy Steel H-Pipes and Sheet Piling for Use in Marine Envirorunents

AMERiCAN WELDING SOCIETi. INC. (AWS)

AWS Dl.I 1998 Structural We1ding Code - Steel

OCCUP A TION SAFETY AND HEALTH ADMINISTRATION (OSHA)

29 CFR Part 1926 1993 (Revised as of July 1, 1996 or latest Edition or revision to) Subpart P Excavations and Applicable Subparts

1.3 SUBMI'T'fALS

The successful Contractor to submit its Proposed Trench Excavation and Shoring Safety Plan after the Award of the Contract. The plan to incorporate detailed PLANS and Specifications for a trench safety system confonning to OSHA standarc\s that accounts for project site conditions, CONTRACTOR's trench construction means, methods, techniques or procedures, the relationship of spoil to edge of trench, and CONTRACTOR's equipment to be used in construction ofproject facilities requiring trench systern(s), CONTRACTOR to provide a statement signed and sealed by a Registered Professional Engineer licensed iI\ the State of Texas statmg that the Trench Excavation and Shoring Safety Plan and the~detafled plans and specifications for the trench safety system are designed In compliance with the Contractor's Standard of Care

11107/02 C70-IA-SOI-O-02161 - 2

OX 0001-1.0325

rVI\...J VrnVU':'lVl'V" ....... JlDVIU1 I 1.t:.\.....!7"---~1L-J"'\.. ..... ....,.1 J...,.\...-1.l 1'-",.,1. ............ 1 " -

BAYPORT TERMIN~, _.()1PLEX PHASE lA Tf(' )H EXCAVATION AND .:?HORING SAFETY PLA..l'o.!

and is in confonnance with appropriate OSHA standards. CON'TRACTOR's plan and the detailed PLANS and SPECIFICATIONS for the trench safety system to be incorporated into the bid documents and the Construction ContracL

1.4 QUALITY ASSURANCE

Trench safety systems to be accomplished in accordance with the detailed Speciflcations set out in the provisions 29 CFR, Part 1926, Subpart P. Legislation that has been enacted by the Texas Legislature [(H.B. No. 1569)) with regard to Trench Safety Systems, is also hereby incorporated, by reference, into these SpecificatiQns_

PART 2 PRODUCTS

2.1 MATERIALS AND/OR EQUIPMEl'-TT

A. Materials

1. Timber Trench sheeting materials to be full size. a minimum of2 inches in thickness, solid and sound, free from weakening defects such as loose ]mots and splits.

2. Sheet Piling Steel sheet piling to conform to one or more of ASTM A328!328M. ASTM A572/A572MI ASTM A690/690M material requirements.

) 3. Steel for stringers (waIes) and cross braces to confonn to ASTM A588.

4. Steel trench Boxes to be constructed of steel conforming to ASTM A36/A36M. Connecting bolts to conform to ASTM A307. Welds to confomi to the requirements of AWS D 1.l.

5. Miscellaneous Materials: Miscellaneous materials to be utilized to conform to applicable ASTM standards.

PART 3 EXECUTION -:

3.1 GENERAL

Trench safety system to be constructed, installed, and maintained in accordance with the Trench Excavation and Shoring Safety Plan as outlined in Paragraph 3 ..5A.ofthis Section.

3.2 ERECTIONfINSTALLATION/APPLlCATION AND/OR CONSTRUCTION

-A. Timber Sheeting

Timber sheeting and size of uprights-, stringers (wales), and cross bracing to be installed in accordance with the CONTRACTOR'S plan. Place cross braces in true horizontal position, spaced vertically, and secured to prevent slidmg, falling,

11107/02 C70-1A-SOI-0-0216J - 3

OX 0001-1.0326

PORT OF HOUSTON Al'~T,ORITY 1 r..Lnl"11" ""\L..:>r L\.......ll J'-I""l." J.'-J'l .. ...,

BAYP-O.RT IERM.INA ~ 7LEX PHASE lA . •'. :XCAVATIOl\ AND 'duRING SAFETY PLAN

or kickouts. Cross braces to be placed at each end of stringers (wales), in addition to other locations required. Cross braces and stringers (wales) to be placed at / splices of uprights, in addition to other locations required.

B. Steel Sheet Piling

Steel sheet piling of equal or greater strength may be used in lieu of timber trench shoring shown in the OSHA tables (proposed standards). Drive steel sheet piling to at least minimum depth below trench bottom as recommended by CONTRACTOR'S Registered Professional Engineer providing design. Place cross braces in true horizontal position, spaced vertically and secured to prevent sliding, falling, or kickouts. Cross braces to be placed at each end of stringers (wales), in addition to other locations required.

C. Trench Boxes

Portable trench box may be used in lieu of timber trench shoring shown in the OSHA tables and to be designed to provide equal or greater protection than timber trench shoring shown in the OSHA tables. In cases where top of portable trench box will be below top of trench, the trench must be sloped to the maximum allowable slope for the soil conditions existing on the Project. In areas where a sloped trench will affect the integrity of existing structures, CONTRACTOR to protect structures prior to sloping trench.

D. Trench Jacks )

When trench jacks arc used for cross bracing and/or stringers (wales), the trench jacks to provide protection greater than or equal to the timber cross bracing shown in the OSHA tables {proposed standards}. Trenchjacks to be placed at each end of stringers (wales) in addition to other locations required.

3.3 REPAIRJRESTORATION

Bed and·backfill pipe to a point at'least one (1) foot above top of pipe or other embedded items prior to removal of any portion of trench safety system. Bedding and backfill to be in accordance with other applicable SPECIFICATION Sections.

Backfilling and removal of trench supports to be in accordance with CONTRACTOR'S Trench Excavation and Shoring Safety Plan. Removal of trench safety system to be accomplished in such a manner to cause no damage to pipe or other embedded items. Remove no braces or trench supports until all personnel have evacuated the trench. Backfill trench to within 5 feet of natural grOUD? prior to removal of entire trench safety system.

11/07/02 C70-1A-SOJ-0-0216J - 4

OX 0001-1.0327

.POKI OF HOUSTON/ BAYPORT TERMINA... V ~THORlTY LEX PHASE lA l.t:.c~r-. ,AL ::.Yt:.Ur ILA 1 JUN~ T fiEXCAVATlON AND dORING SAFETY PLAN

3.4 FIELD QUALITI' CONTROL

A Supervision

Provide competent supervisory personnel at each trench while work is in progress to ensure CONTRACTOR'S methods, procedures, equipment, and materials pertaining to the "Safety systems in this Section are sufficient to meet requirements of OSHA Standards.

B. Inspection

CONTRACTOR to make daily inspection of trench safety system to ensure that the system meets OSHA requirements. Daily inspection to be made by competent or personnel. If evidence of possible cave - ins slides is apparent, all work in the trench is to cease until necessary precautions have been taken to safeguard personnel entering trench. CONTRACTOR to maintain permanent record of daily inspections.

3.5 PROTECT10N

A. Maintenance of Safety System

The safety system to be maintained in the condition as shown on the Trench Excavation and Shoring Safety Plan as designed by the CONTRACTOR's Registered Professional ENGINEER. The CONTRACTOR to take all necessary precaution to ensure the safety systems are not damaged during their use. If at any time during its use a safety system is damaged, personnel to be immediately removed from the trench excavation area and the safety system repaired. The CONTRACTOR is to take all necessary precautions to ensure no loads, except those_provided for in the plan., are imposed upon the trench safety system.

3.6 MEASUREMENT AND PAYMENT

A. - -Measurement

Measure "Trench Safety System" by linear foot of trench protected. Shoring of trench at manholes and other line structures to be included in the lineal foot cost.

B. Payment

Pay for "Trench Safety System" measured as stated and as shown on Proposal. Payment to be full compensation for all work described herein. There will be no increase in the Contract price because of the incorporation of CONTRACTOR'S Trench Excavation and Shoring Safet¥ Plan or CONTRACTOR'S detailed plans and specifications for the trench safety system into the proposal documents and the Construction Contract. There will be no increase in the Contract price because

11107/01 C70-IA-SOJ-O-02161 - 5

OX 0001-1.0328

PORT OF HOUSTON Arp--1,ORITY L cL.t1NH >\'L ;::,rCA._J.r lL-M.' H_I> h ...

BAYPORTTERMINk \...JLEXP-HASE lA . . .-', ::XCAYATIONAND ~uRING SAfETY PLAN

of modifications to Cm·rrRACTOR'S plan and/or the CONTRACTOR'5 detail plans and specifications for the trench safety system, whether or not the result of unforeseen or differing site or soil condltions_

C. Pay for "Design of Trench Excavation and Shonng Safety Plan" by lump sum as shown on Proposal. Payment to be full compensation for all professIOnal services relating to the'EONTRACTOR's Trench Safety System.

END OF SECTION

11/07/02 C70-1A-SOI-O-02161 - 6

OX 0001-1.0329

TAB 15

Contract, Technical Specifications, Section 01500 Temporary Facilities and Controls (DX1-1.0271-82)

t'UX.! Ul" HU U ~! VI' . . ·p HU.K.J l Y - I t:.y ' )\..,AL :::.t't:.\..,lrll...h !lUI'-.::. BAYPORT !ERMIN. (/iPLEXPHASE lA ( . ,MPORARY fACILITIES / AND COl\'TROLS

SECTION 01500 TEMPORARY FACILITIES AND COI':TROLS

PART 1 GENERAL

1.1 SUMMARY

A. Subject to the General and Special Conditions, tlUs Section describes temporary facilities and necessary controls for the project including utilities, • telecommumcations, sanitary facilities, field office, storage sheds and building, safety requirements, first aid equipment, fire protection, security measures, protection of the Work and property, access roads and parking, environmental controls, disposal of trash, debris, and excavated material, pest and rodent control, _ water runoff and erosion controL

B. The facilities and controls specified in this section are considered minimum for the Project. The CONTRACTOR may provide additional facilities and controls for the proper execution of the Work and to meet CONTRACTOR'S responsibilities for protect.ion of persons and property. ·

12 CONTRACTOR'S RESPONSIBILITY

Comply with applicable requirements specified in other sections of the Specifications.

)

l. Maintain and operate temporary facilities and systems to assure continuous service.

2. Modify _and extend systems as Work progress requires. 3. Completely remove temporary materials and equipment when their use is no longer required.

4. Restore existing facilities·used for temporary services to specified or to original ~?ndition.

1.3 TEMPORARY. UTILITIES

A. Obtaining T ernporary Service.

1. Make arrangements with utility service companies for t~porary services. 2. Abide by rules and regulations of the utility service companies or authorities having jurisdiction.

3. Be responsible for utility service costs Wltil the Work is substantially complete. Included are fuel, power, light, beat, and other utility services necessary for execution, completion ~ t~ting, and initial operation of the Work. · •·

11 /07/02 C70- l A-SO1-0-01500- 1

ox 0001-1 .0271

PORT OF HOUSTON A'- ORITY 1J:::.LHN- '\.L ::>r.C'I...lri\..M.IAV1'"-'

BAYPORTTERMIN~ ~LEX PHASE lA ORARY FACILITIES L ~D CO~'TROLS

B. Water ' I

1. Provide water required for and in connection with Work to be perfonned and for specified tests of piping, equipment, devices, or for other use as required for proper completion of the Work.

2. Provide and maintain an adequate supply of potable water for domestic consumption by the CONtRACTOR petsonnel and Port of Houston Authority (Port Authority) and its representatives.

C. Telecommunications

1. Provide emergency telephone service at the CONTRACTOR'S office for use by CONTRACTOR personnel and others performing work or furnishing services at the site.

2. Provide field office telephone system with number of incoming lines, equal to that specified for telephone type described in Part 1.4.C.8 and one separate line for fax machine, described in Part 1.4.0.14. Provide five, separate Tl lines for computer modem connections and electronic data information (EDI) communications; one line for each of the closed offices and two lines, one each, in the main reception and conference room areas. Provide all appropriate jacks, wiring and equipment, IUJUired for a complete telecommunications (voice, fax and EDI) system. Cost for local calls and other project-related calls made by such individuals and their representatives shall be paid for by the CONTRACfOR.

D. Sanitary Facilities )

L Provide and maintain sanitary facilities, in compliance with state and local health authorities, for persons on the job site.

2. Enforce the use of sanitary facilities by constOlction personnel at the job site. Such facilities shaH be enclosed. Pit-type toilets will not be permitted. No discharge will be allowed from these facilities. Collect and ·. store sewage and waste so as not to cause a nuisance or health problem;

hav.e sewer and waste hauled off-site and properly disposed, in accordance with applicable regulations.

3. Locate toilets near the Work site and secluded from view insofar as possible. Keep toilets clean and supplied throughout the course of the Work.

l I /07/02 C70- IA-SOI-0-0t500-2

ox 0001-1 .0272

ruK J Ut" t1U U::> 1 UN' '\J I.HUK.J I Y ! l:l(' ' ~'-..AL ::>t'J:.'-..U' J\...A I JU!'\':> BAYJ?ORT TERMIN~ o-eLEX PHASE lA ( ).1PORARY FACILITIES · 7 AND C~'TROLS

1.4 FIELD OFFJCE

A. Furnish and Locate

I. Furnish, install, and maintain a fteld office for the exclusive use of the Port Authority. Provide main reception area, conference room (12'x10') for project meetings and three separate closed offices (8'xJO' each) for the Chief Engineer, Construction Manager and Inspector. Locate the office near the Site or in a place approved by the Chief Engineer. Office to be leveled, blocked, tied down, skirted and relocated, if necessary. Off ice to be provided on proper foundations. Provide proper surface water drainage and connections to all utility services. Raise grade under field office, as necessary, to an elevation adequate to avoid flooding.

2. Provide office space ready for occupancy ten (I 0) days after date fixed in Notice to Proceed Office to remain on the site for a minimum of 30 working days after the final acceptance of the Project Work.

3. Provide a minimum of 100 square feet of hard stand, all weather field office entrance and parking area to accommodate parking for 10 vehicles. Provide a hard stand, all weather wal.lcway from parking area to field office trailer.

B. Minimum Construction

} 1. Completely weather-tight with insulated roof and walls.

2. Exterior finish and interior finish acceptable to Chief Engineer. 3. Stairs or walkway with handrail and entrance platform (4' x 4') with a mud scraper ~~ door 4. Resilient floor covering 5. Screened windows with an area equal to approximately 10 percent of floor .. area sufficient for light, view. and ventilation. Provide windows with operable sash. Provide blinds or drapes on all windows.

6. Provide two secure. lockable exterior doors with dead bolt cylinder locks, keyed_alike. Provide six sets of keys.

C. Mimmum Services

I. Security bars on doors and windows 2. Exterior light at entrance 3. Interior fluorescent, 110 volt lighting of 50 foot-candles at desktop height 4. Electric automatic heating to maintain 65°F in winter 5. Electric automatic cooling to maintain 75°F in summer 6. Electric power service

11/07/02 C70- l A-SO 1-0-01500-3

ox 0001-1.0273

PORT OF HOU STON A l ' 'ORITY

r

BAYPORT TERMINA~ _"PLEX PHASE IA / ORARY FACILITIES AND COt..'TROLS

7. Minimum of two duplex ,I I 0 volt electric wall outlets in each closed ·.

office space and four duple:·. I I 0 volt electric wall o ut) ets ir. each common area space.

8. Six telephones with intercom line, three incoming/outgoing lines. touchtone , conference speaker and 12-foot coiled handset cord. One telephone v.rill be located in each closed office area; and one telephone:, each, in the: main reception and conference room areas. One telephone instrument v.ill be kept, as a spare, in case of installed equipment breakdown.

9. - Bottled water service with cooler capable of producing hot and cold water 10. Separate sanitary facilities with one water closet and one-lavatory and medicine cabinet 11. Plumbing and sewers as required, protected from freezing

D. Minimum Furnishings

I. Six, steel 5-drawer desks, 30 inches by 60 inches with desk surface located 29 inches from floor 2. Six, five castor base; adjustable seat height; adjustable, height and angle, locking seat back; adjustable arms; swivel desk chairs 3. One drafting table., three feet by six feet. witlnwo drafting stools and light 4. Three plan racks with racks to hold eight racks of drawings 5. Nine, locking, 4-drawer steel, legal file cabinets 6. Book shelving or three bookcases with a minimwn of 45 feet of shelf space 7. Six waste baskets 8. Two tack board, 30 inches by 36 inches 9. Two carbon dioxide (1 0 pound) fire extinguishers 10. Identifying exterior sign acceptable to Chief Engineer 11. Two first-aid kit 12. Six (6) protective belm~ts (hard hats) for ~e by Port Authority and visitors 13. Conference table. 36 inches by 96 inches and I 0 steel folding chairs 14, Fax maclllne with connecting cables 15. Paper cup dispenser with cups 16. Two paper towel dispenser with towels 17. Telephone answering machine with cormecting cables 18. Duplicator, dry type, self-feeding; capable of providing 8 Yl by 11 inch, 8 Yl by 14 inch and II by 17 inch copies; collating I0 mutilple copies; reduction and enlargement capabilities; including maintenance service agreement for project duration L9 Two clothes racks 20. Other furnishings at CONT~CTOR ' s option . ,

1110- 02 C70- lA-SOl -0 -0 I 500-4

ox 0001 -1.0274

rvt.\.! vr nvv.:>JVI' · BAYPORTTERMINA aLEX · •nu.JUJ t

PHASE I A lJ.:.\..v· '"'--"-1-

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1

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j1PORARY FACILITIES AND COl'o.'TROLS .LA.....U !~r'\.Jo •"-'•'...>

E. Mamtenance

I. Schedule continuous maintenance of office, walkways, and services.

Office to be cleaned not less than once per week.

2. Provide soap, paper towels, cleansers, janitorial service and appunenances. 3. Immediately repair any damage, leaks, or defective service.

F. Provide adequate space for one set of Contract Documents in the office for ready reference.

1.5 STORAGE SHEDS AND BUILDINGS

A. As may be necessary provide adequately ventilated, watertight storage facilities with floor above ground level for materials and equipment susceptible to weather damage. '

B. Storage of materials not susceptible to weather damage may be on blocks off the ground.

C. Store materials in a neat and orderly manner. Place materials and equipment to permit easy access for identification, inspection. and inventory.

D. Fill and grade site for temporary strucrures to provide drainage away from temporary and existing buildings.

1.6 SAFETY REQUIREMENTS

A. Submit and follow a safety program.

B. Conduct operations in strict accord with applicable federal, state and local safety codes and st.a.twes and with good construction practice. The CONTRACTOR is fully ~ponsible and obligated to establish and maintain procedures for safety of all work, persomu:_l,. and equipment involved in the Project.

c. Observe and c;omply with all applicable law governing health and safety including without limitation the Texas Worker's Health and Safety Act (Ch.4ll of the Texas Labor Code) and with all safety and health standards promulgated by Secretary of Labor under Section 107 of Contract Work Hours and Standards Act, published in 29 CFR Part 1926 and adopted by Secretary of Labor <Is occupational safety and health standards under the Williams-Steiger Occupational Safety and Health Act of 1970, and observe and comply with any other legislation enacted for safety and health ofCO't\'TRACTOR's employees. Such safety and health standards apply to subcontractors and their employees as well as to the CONTRACTOR and its employees. . ~.

11 /07/02 C70- I A-SO l -0-0 1500-5

ox 0001-1.0275

t'UK l Ut t1UU:::.I UN A~ ' ' '1-UKII Y BAYPORT TERMIN~'- '1.PLEX PHASE lA .....

.___;

__ :ORARY FACILITIES AND CO!\'l:ROLS

D. Observance of, and compliance with, applicable Jaw shall be solely and without qualification the responsibility of the COt-.T"fRACTOR without reliance or superintendence of, or direction by, the Port Authority, or any Port Authority representative. lrrunediately advise the Chief Engineer of investigation or inspection by federal safety and health inspectors of the CONTRACTOR or subcontractor's work or place of work on the job site under this Contract, and after such inv~stigation or inspection. advise the ChiefEngineer of the r~sults.

E. Safety measures, including but not limited to safety personnel, first-aid equipment, ventilating equipment, and safety equipment, in the specifications and shown on the Drawings, are obligations of the CONTRACTOR.

F. Maintain required coordination with local police and fire departments during the entire period covered by the Contract

1.7 FIRST AID EQUIPMENT

A. Provide a first-aid kit throughout the ~nstruction period. List telephone numbers for physicians, hospitals, and ambulance services in each first-aid kit

B. Have at least one person thoroughly trained in first aid procedures present on the site whenever Work is in progress.

1.8 FIRE PROTECTION

A. fire Protection Standards

1. Conform to specified fire protection and prevention requirements as well as to those which may be established by federal, state, or local governmental agencies.

2. Provide portable fire extinguishers, rated not less than 2A or 5B in accordance with NFPA Standard No. 10, Portable Fire Extinguishers, for each temporary building, and for every 3000 square feet of floor area of facilities"under construction.

3. Locate portable fire extinguishers within 50 feet maximum from any point in the Project uea in which work is being performed.

B. Fire Prevention and Safety Measures.

I. Prohibit smoking in hazardous areas. Post suitable warning signs in areas which are continuously or intermittently hazardous.

2. Use metal safety containers for storage and handling of flammable and combustible liquids.

I 1/07/02 C70-l A-SO 1-0-01500-6

ox 0001-1 .0276

rv.K.t ur .11uu::.t VN 'nvru J 1

BAYPORTTE.RMINA_ aLEXPHA.SE lA I/ )iPORARY FACILITIES ~ AND CONTROLS

1.9 SECURITY MEASURES

A. Protect all Work materials, equipment, and property from loss, theft, damage. and vandalism. CONTRACTOR's dury ro protect property includes Port Authority's propc:ny and all other property used in connection with the performance of the Contract.

B. If existing fencing or barriers are breached or removed for purposes of construction, provide and m~intain temporary security fencing equal to existing.

1.10 PROTECTION OF UNDERGROUND UTILITIES AND PIPELINES

A. Prevent damage to existing u tilities during construction. Give owners of existing utilities at least 48 h ours notice before commencing Work in the area, for locating the utilities during construction, and for making adjustments or relocation of the utilities when they conflict with the proposed Work.

B. Utilize the Lone Star Notification Center, telephone number, 713-223-4567, which must be called 48 hours in advance. The toll free telephone number is 800- 669-8344.

1.11 PROTECTION OF TIIE WORK AND PROPERTY

A. Preventive Actions.

)

l. Take precautions, provide programs, and take actions necessary to protect the Work and public and private property from damage.

.· 2. Take action to prevent damage, injury or loss, including, but not be limited to, the following:

a. Store apparatus, ma!erials, supplies, and equipment in an orderly, safe tnaimer that will not unduly interfere with progress of the Work or of the worlc of any other contractor, any utility service company, or the Port Authority •s operations.

b. .Provide suitable storage for materials, which are subject to damage by exposure to weather, theft, breakage, or otherwise.

c. Place upon the Work or any part thereof only such loads as are consistent with the safety of that portion of the Work.

d. Frequently clean up refuse, rubbish, scrap materials, md debris caused by construction operations, keeping the Project site safe and orderly. .

e. Provide safe barricades and guard rails around openings, for scaffolding, for temporary sta1rs and ramps, around excavations, -elevated walkways, and in·other hazardous areas.

11/07/01 C70-1A-SOJ -0-01 500· 7

ox 0001-1 .0277

I'UK J OF HOU ~TUN A ~· ' HU.K.l! Y BAYPORT TEB.MIN~·'<PLEX PHASE l A .>ORARY FACILITIES AND CONTROLS

3. Notify the Chief Engineer and provide to ChiefEngineer copies of written consent from proper parties before entering or occupying with workers, tools, materials or equipment, privately owned land except on easements provided for construction.

4. Assume full responsibility for the preservation of public and private property on or adjacent to the site. If any direct or indirect damage is done by, orbn account of, any act, omission, neglect, or misconduct in execution of the Work by the CONTRACTOR. it is to be restored by the CONTRACTOR to a condition equal to or better than that existing before the damage was done.

B. Tree, Plant, and Wetland Protection. Conform to requirements specified in Section 01015 Contractor Use ofFacilities.

C. Protection of Existing Structures

1. Underground Structures:

a Underground structures are defined to include, but not be limited to, sewer, water, gas, and other piping; and manholes, chambers, electrical and signal conduits, tunnels, and other existing subsurface installations located within or adjac.cnt. to the limits of the Wort.

b. Known underground structures, including water, sewer, electric, and telephone service connections are shown on the Drawings. This infoanation is only approximately shown for the assistance of the CONTRACTOR, and is not guaranteed to be correct or complete.

c. Explore ahead of trenching and excavation work and uncover obstructing underground structures sufficiently to determine their location, to prevent damage to them, and to prevent interruption of utility services. Restore to original condition damages to underground struc;ture at no additional cost to the Port Authority.

d. Necessary changes in location of the Work may be made by the Chief Engine~r to avoid unanticipated underground structures.

e. lfperrnanent relocation of an underground structure or other subsurface installation is required and n ot otherwise provided for in the Contract Documents, the Chief Engineer will direct the CONTRACTOR in writing to perform the Work, which is to be paid for under the provisions for changes in the Contract Price as described in Section VIII - General Conditions.·

2. Surface Structures:

Surface stru.ctures are defined as existing buildings, structures and other constructed installations abo-ie the ground surface. Included with such structures are their foundations or any extension below the surface. Surface structures include, but are not limited to buildings, tanks, walls,

11 /07/02 C70- l A-SOI-0-01500-8

ox 0001-1 .0278

rur..1 vr nuu.)JVJ,.,---_,JnVl'UJ 1 BAYPORT TERMINt. i fLEX PHASE I A bridges, roads, dams, channels, open drainage, piping, p~les , v.."ires, posts, signs, markers, curbs, walks, guard cables, fencing, and other facilities that are visible above the ground surface.

3. Protection of Underground and Surfac.e Structures:

a. Sup_port in place and protect from direct or indirect damage underground and surface strucrures located within or adjacent to the limits of the Work. Install such supports carefully and as required by the party owning or controlling such structure.

b. Before installing structure supports, CONTRACTOR·shall satisfy the Chief Engineer that the methods and procedures to be used have been approved by the owner of the structure. Avoid moving, or in any way changing, the property of public utilities or private service corpofations without prior written consent from a responsible official authorized by that service or public utility to give such consent. Representatives of these utilities reserve the right to enter within the limits of this project for the purpose of maintaining their properties, or of making such changes or repairs to their propeny that may be considered necessary by performance of this Contract.

c. Notify the owners and/or operators of utilities and pipelines of the narure of construction operations to be perfonned and the date or ·. dates on which those operations will be performed. When construction operations are required in the immediate vicinity of existing structures, pipelines, or utilities, give a minimum of 5 working days advance notice. Probe and flag the location of underground utilities prior to commencement of excavation. Keep nags in place until construction operations reach and uncover the utility.

d. CONTRACTOR ass-umes risks attending the presence or proximity of underground and surface structures within or adjacent to the limits to tlfe Work, including but..not limited to, damage and expense for direct or indirect injury caused by this Work to any strucrure. ·Immediately repair damage caused, to the satisfaction of the owner of the damaged structure. ·

D. Protection oflnstalled Products.

1. Provide protection of installed products to prevent damage from subsequent operations. Remove protection facilities when no longer needed, prior to completion of Wotk.

2. Control traffic to prevent damage to ~utpment, materials, and surfaces.

.. •• • • #

11/07/02 C70-1 A-SO 1-0-01500-9

ox 0001-1 .0279

PORT OF HOUSTON AT- · 'iORlTY - BAYPORT TERMIN~- )PLEX PHASE lA ORARY FACILITIES AND CONTROLS

1.12 ROADS AND PAR.K.ING )

A. Designate temporary parking areas to accommodate construction personneL When site space is not adequate, provide additional off-site parking. Locate as approved through the submittal process.

B. Minimize use by construction traffic of ex..isting streets and drivev>'ays.

1.13 ENVIRONMEI\'TAL CONTROLS

A. Provide and maintain methods, equipment, and temporary construction as necessary for controls over environmental conditions at the construction site and adjacent areas.

B. Comply with statutes, regulations, and ordinances which relate to the proposed Work for the prevention of environmental pollution and preservation of natural resources, including but not limited to the [National Environmental Policy Act of 1969, PL91-190, Executive Order 11514.)

C. The Port Authority recognizes that construction of projects should have minimum impact to the surrounding environment. The CONTRACTOR shall adopt construction procedures that do not cause WliJCCessary excavation and ftlling of the terrain, indisc:riminate destruction of vegetation, air or stream pollution, nor the harassment or destruction of wildlife.

'I D. Recognize and adhere .to the environmental requirements of the ProjecL I Disturbed areas sh.all be strictly limited to boundaries established by the Contract Documents. Particularly avoid pollution of on-site streams, sewers, wells, or other water sources.

E. Burning of rubbish, debris, or waste materials is not permitted.

1.14 POLLUTION CONTROL

A. Provide methods, means, and facilities required to prevent contamination of soil, water or atmosphere by discharge of noxious substances from construction operations.

B. Provide equipment and personnel to perfonn emergency measures required to contain any spillage, and to remove contaminated soils or liquids. Excavate and dispose of any contaminated earth off-site and replace with suitable compacted fill and topsoil.

C. Take special measures to prevent harmful-substances from entering public waters.

Prevent disposal of wastes, effluents, chemicals, or other such substances

11/07/02 C70- 1A-S01-0·0l500- l 0

ox 0001-1.0280

PORT OF HOUSTON r·';HORJT\' l 1:.~7 - ~1'\..1... ::>r .C.\..-.t.r ''-'"', ''-'·'J BAYPORTTERMINk. OLEXPHASE !A )PORARY FACILITIES C:7 AND C~TROLS

adjacent to streams, or in sanitary or storm sewers. Limit discharge of suspended solid from Disposal Area to 300 mg/L maximum.

D. Provide systems for control of atmospheric pollutants.

1. Prevent toxic concentrations of chemicals. 2. Prevent hinmful dispersal of pollutants into the atmosphere.

E. Use equipment during construction that conforms to current federal , state, and local laws and regulations.

1.15 NOISE CO'l\'TROL

A. Provide vehicles, equipment, and construction activities that minimize noise to the greatest degree practicable. Noise levels shal!'conform to the latest OSHA standards and applicable regulations and in no case will noise levels be permitted which interfere with the operations of the Port Authority or create a nuisance in the surrounding residential neigbborhoQds.

B. Conduct construction operations during working hours, in accordance with the General Conditions, except as approved by Chief Engineer.

C. Select construction equipment to operate with minimum noise and vibration. If in the opinion of the ChiefEngineer, objectional noise or vibration is produced by equipment, rectify such conditions without additional cost to the Port Authority. The Sound Power Level (PWL) of any equipment shall not exceed 85 db A (re: I 0-12 watts) measured 5 feet from the piece of equipment, or the levels prescribed by local regulations, whichever is lower. Explicit equipment noise requirements are specified v..-iih equipment specifications.

1.16 DUST CONTROL

Control objectionable dust caased by operation of vehicles and equipment. Apply water or use other-methods, su&ject to approval through the submittal process, which will control the amount of dust generated. Comply with requirements specified in Section 0I532-Gene-ral Source Controls.

1.17 WATER RUNOFF AND EROSION CONTROL

A. Where required, the CONTRACTOR is to comply with the National Pollutant D1scharge Ehmination System (NPDES} permit as stated in the [Federal Register, Vol 57, No. 175.]

. ..

11 /07/02 C70· I A-SUI-0-0 1500-11

ox 0001-1 .0281

r vl'l. • vr nvu.:> t vt-. ~· ·• flVIU. 1 J 'C.'-nJ.,.Y '\.....1"\L... ..>r L"-U &\...on 1 l Vt."'..:J

BAYPORT TERMINi~ ·' fLEX PHASE lA · -, =>QRARY FACILITIES --._.;, AND CONTROLS

B. In addition to the NPDES requirements, the CO?-.'TRACTOR is to: )

1. Provide methods to control Sl.uface water, runoff, subsurface water, and water from excavations and structures to prevent damage to the Work. the site, or adjoining properties.

2. Control fill. grading, and ditching to direct water away from excavations, pits, tunnels, a.11d other construction areas; and to direct drainage to proper runoff courses so as to prevent any erosion, sedimentation, or damage.

3. Provide, operate, and maintain equipment and facilities of adequate size to control surface water.

4. Dispose of drainage water in a manner to prevent flooding, erosion, or other damage to any portion of the site or to adjoining areas and in confollllance with environmental requirements.

5. Retain existing drainage patterns external to the construction site by constructing temporary earth berms. sedimentation basins, retaining areas, and temporary ground cover as needed to control conditions.

6. Plan and execute construction and earth work by methods to control surface drainage from cuts and fills, and from borrow and waste disposal areas, to prevent erosion and sedimentation.

a. Keep to a minimum the area ofba:re soil exposed at ooe time. b. Provide temporary control measures, such as berms, dikes, and drains.

7. Construct fills and waste areas by selective pLacement to eliminate surface silts or clays, which will erode..

8. Inspect earthwork periodically to detect any evidence of the start of erosion. Apply corrective measures as required to control erosion.

1.18 PAYMENT

No separate payment for the work specified in this section. Such work to be considered incidental, and payment will be included as part of the appropriate lump sum and/or unit prices specified in the Proposal.

PART2 PRODUCTS- (NOT USED)

PART3 EXECUTION- (NOT USED)

END OF SECTION

11/07/02 C70-l A-SO 1-0-0 1500·1 2

ox 0001-1 .0282

TAB 16

Contract, Special Conditions, §12 (DX1-1.0244)

Bayport Tenninal Complex rc::ul ucu y ....... - .... - -

Phase:1A Wh2Ft and D~ \ . rya-

Sheet Title , U-105 8" Potable Waterline Plan -5 ) U-106 Typical Wharf Section with Potable Waterline Details U-107 Potable Water Delails

12. Construction Manager:

(a) Independent Contractor: The Project will be administered by a Construction Manager. The Port of Houston Authority has hired CH2M HILL as the Construction Manager for this Project. The Construction Manager is an independent contractor, and I)ot an agent or employee, of the Port. Accordingly, the Construction Manager cannot, among other things, enter into agreements on behalf of, make agreements on behalf of, or bind the Port. The CH2M Hill representative shall be:

Stephen A. Curtis, P.E.

(b) Inspector: The Construction Manager shall be the Inspector for the Work and have all authority delegated to the Inspector by the Contract Documents. '

(c) Paper Flow: One of the duties of the Construction Manager is to coordinate all paper flow for the Project. Accordingly, all paper work (including, but not limited to, Submittals, RFls, and Change Order documentation) required to be submitted by the Contractor to the Chief Engineer, other Port employees or to the Design Consultant pursuant to the Contract Documents shall be submitted to the Construction Manager, attention of the CH2M Hill individual designated above~ for distribution to the Chief Engineer, other.Port employee. and Design Consultant, as appropriate. The Contractor shall submit the appropriate number at originals and copies of the paper work to the Construction Manager, with copies of transmittal letters directly to the Chief Engineer and other required individuals. Responses from the Chief Engineer, other Port employees, and Design Consultant will be provided to the Construction Manager who, in tum, will distribute the responses to the Contractor and other appropriate individuals. The Contractor shot.dd take into account in scheduling the Work the role of the Construction Manager and the time required for the paper to flow through the Construction Manager. ) ,_ Notwithstanding the foregoing, any notices to the Port Police or Coast Guard (including, but not limited to, reports pursuant to General Conditions Sections 4.08, 4.10, 4.14, and 4.19) shall be made directly to the designated individuals as set forth in the General Conditions, with a copy to the Construction Manager.

(d) Chief Engineer and Changes: The Construction Manager does not have the authority of the Chief Engineer. For example, the ConStruction MaRager has no authority to resolve disputes, issue Construction Change Directives: orch~mge any of the terms and conditions of the Contract, including. without limilation, issuing Modifications or ruling on or granting time extensions or Change Orders. The Construction Manager wilt make recommendations to the Chief Engineer, when requested, regarding any disputes. changes or Modifications.

(e) Responses to RFls: The Construction Manager shall review RFls and. In instances in which the response to the RFI does not require a response from the Design Consultant or a Modification of any Contract Documents, respond directly to RFls. The authority of the Construction Manager to respond to RFls shall specifICally include RFls regarding discrepancies, errors, conflicts or omissions in the Contract Documents and shall specifically include the authority to otherwise clarify the Contract Documents and to make decisions regarding issues which arise in the field, in each instance so long as such responses, clarifications and decisions do not Involve a Modification in the Contract Documents .

... ,',.

The authority of the Design Consultant to respond to RFls and submittals IS as set forth ;n the General Conditions. Such responses shall be made through the Construction Manager.

Special Conditions (rev'd August 1, 2002) X-60f9

OX 0001-1.0244

TAB 17

Contract, Addendum No. 8 (DX1-1.0021)

Bayport Terminal Complex Addendum No.8 Phase 1A Wharf and Dredging Co:

'-.. / (, (Revised June 6, 2003)

D. SMALL BUSrNESS PARlleIPATION:

Small business participation for purposes of this Contract is defined as the dollar amount of the Contract, which will be performed by one or more, approved or certified small businesses. A small business for purposes of this Contract is a firm for which the gross revenues or number of employees averaged over the past three (3) years, inclusive of any affiliates as defined by 13 United States Code of Federal Regulations Section 121.103, does not exceed the size standards as defined pursuant to Section 3 of the Small Business Act (15 U.S. Code, Chapter 14A) and for which the net worth of each owner does not exceed $750,000, excluding residence and the value of the small business.

Please check the appropriate statement(s):

1. _ I certify that _-::-::--_-:-:~_---:_ _- _ - - - is a small business as defined above.

(Name of Proposer)

2. . / I certify that the subcontractors shown on the sub-contract sheet above as certified small businesses will perform work on this contract for $ "'2...'1....1 536. 00 0 (dollar amount of the Contract which will be performed) of the tolal contract price, or ''3+ % of the contract work.

3. _ I certify that (name of Proposer) has made a good-faith effort to use certified small businesses for this contract and has been unable to do so.

E. PERSONAL PROPERTY:

The above TOTAL AMOUNT PROPOSED contains $ II~ I~ 1...,;7 00 worth of tangible personal. property which is authorized by law to be purchased tax free and which wi be incorporated into the completed project.

F. CERTIFICATION OF PROPOSAL:

The above TOTAL AMOUNT PROPOSED price shall remain firm for One Hundred Fifty (150) calendar days after the Proposal opening date.

The undersigned agrees, if awarded the Contract, to begin the Work within ten (10) working days after issuance of a fully executed Purchase Order by the Port Authority, and to complete such Work within Seven Hundred and Thirty (730) calendar days after receipt of the Port Authority's purchase order; and further agrees that, should the undersigned fail'to complete the Work within the agreed time, the Contract Price will be reduced by Five Thousand Dollars ($5,000.00) for each and every CALENDAR day thereafter until completion of the Work. See Sections 5.05 and 5.06 of the General Conditions.

The undersigned further agrees to meet the completion milestones specified in Section 10 of the Special Conditions on or before the time indicated, and should the undersigned fail to complete the Work within the agreed time the Contract Price will be reduced by the following amounts:

Area "A": Twenty Thousand Dollars ($20,000.00) for each and every CALENDAR day thereafter until completion of the Work in Area "A". Area "1": Four Thousand Dollars ($4.000.00) for each and every CALENDAR day thereafter until completion of the Work in Area "1". Area "2": Six Thousand Dollars ($6,OOO.OO) tOf each and every CALENDAR day thereafter unit completion of the Work in Area "2".

The reductions in the Contract Price set forth in paragraph 2 and 3 above shall be assessed independently of one another and shall be additive. .

The undersigned deposits with this proposal a Cashier's Check or Certified Check, or a Bid/Proposal Bond on the Port Authority's form executed by a responsible corporate surety authorized to do business in Texas, In the amount of Five Percent (57.) of the Greatest Dollars ($ 57. ) in accordance wilh the Instructions to proposers. Cashiers or Certified Check must be drawn on a bank that is a member of the Federal Deposit Insurance Corporation mount Bid by Principal

Specifications and Proposal (rev'd December 1,2002) 11/ - 15

OX 0001-1.0021

TAB 18

Email from Thiess to Anderson dated August 1, 2004 (PX84)

c • ·.

f

Larry Applegate ':

From: Andrew. Thiess@CH2M.com Sent: Sunday, August 01, 2004 5:45AM To: ANDERSONHE@zachry.com Subject: Freeze Wall

Tech Memo 003 - Freeze Wal Andy,

I have brought this issue up to Gary Kuhn but have not received a response, ?nd so I will for"1ard it to you now that you are on board. . . Regarding the free:z.e walL ~~e have no requirement for a submittal as it was not anticipated by the designer~. However, the Port and the engineering team are very concerned about the freeze wall and the question has come up what ~ind of submittal we should ask for, if any, and .-whet her we should revie1~ the design, et<.:. Gary Kuhn and the freeze wall, guys, when they 1~ere here, indicat,ed that they hac! expect;ed to provide a detailed submittal any\~ay._ Attached is a document that outlines the ltta"y I "Jould like to approach the freeze wall submittal. Please review and let me know if you have any -concerns with this approach. In particular, note that the signature of a Texas PE would be ~equired . 1 have discussed this with the Port and they believe this requirement cannot be avoided. Please let me kno1i if you think the approach or the- ·Texa·s PE signature will be a problem. Note that this doc"ument is only a draft-- for your revie~ ano not ah official directive at this time.

Andrew W. Thiess, PE, PMP CH2M HILL 7600 W. Tidwell 3d.~ Suite ~00 Houston, TX 77040-5719 . Tel: (713) 462- 0161 Direct: "(713) .4 62- 0169, ext' 311- Fax (713) 462- 0165 Mob le: (832) 250- 2999 ath ess0ch2m.com . ·'

·-.

..

No. 2006-72970 ZCC EXHIBIT RKK 00031 4

84

0084.0001

.. '· ·~ .4/Lfl 4-.t~~SoA./ .- ;:J;?DjJ3i(j' !JJ.?N-~dc J • '

l3i5M :10 ~ ·- 13v!71~~-::b PlAr-f~ :::r01iJJ GJ../?5/:;o -

Issues/Concerns Pertaining to Freeze Wall Technology

Responses from GeoEngineers, Inc. (GEl) and RKK-SoilFreeze Technologies, LLC (RKK).

1) Recognizing the large clay su·aturns that exist in the soil, particularly at the toe of the wall, raises concern due to the lack of water in clay soils. How will this be dealt with?

Clay actually has more moisture in its pore spaces than does sand. Because the water is held very tightly, clay may appear to have Jess moistqre, but the water content tests verify that it bas more than enough to freeze solid. We plan to do our own testing of samples .. from the new borings to verify frozen strength ancl freezing parameters, but the dat::r · available thus far indicates that freezing should be no problem at this site give,, the : ·· conservative assumptions underlying the preliminary SoiiFreeze wall design. _{GEl/ . .

. 2) In the case of storms/h~rricanes, explain how the stmctural integrity will be .

maintained?

One issue is the integrity of the SoilFreeze w~U during a large stonn or hun-icane. The frozen wall will"actuaJiy be embedded within the unfrozen fill that Zachry will .plilce in.· ·... the water soon. 'There will be a20 to 30 foot wide buffer of unfrozen soil between the· frozeri waJI and the water. The height of this new fill has not yet been determined. · . · However, based on recent discussion in Houston, it appears that a height of 4 to 6 feet ;_ .: · . above nonnal sea level ':"ill be adequate for most stonns. The wall itself should be qui(e ·.

:1dequatel y protected from water action. (GEl) ,£ · ' lT:\C4? :,......_5· .J./1-TF <Jt/?/r- -:- ~ .l:.-/.

The protection of above-ground system componenls (manifold Jines, pumps, chillers, : electrical supply) is of critical importance. During SoilFreeze wall fomlation a Joss of · power or damage requiring repairs to the brine-circulation system should be avoided if~ . all possible, but the impact will be on schedule and not on the structural integrity of the , · )~.

:'

SoiJFreeze wall. After the SoilFreeze wall is formed, regardless of the status of excavation at the time of a Joss of power or system damage requiring repairs, such events .. :~ • ..

wj]J not affect the stmctural integrity of the SoilFreeze wall over a period of a few days, · assuming the ·~·hole shoreline is not washed away. The restoration of full system · · function will bring soil temperatures and wall integrity back to their previous state within.

n week or so. The protection of the refrigeration hardware is obviously imponant, · ·. particularly from a cost standpoint. As the design of the SoiJFreeze waH gets underway, we will work with the fabricators and Jeasers of the equipment (both in Texas nnd familiar with Houston weather conditions) on a detailed plan that allows for quick disassembly and demobilization of the chillers.. (RKK)

3) Please exp13in how the freeze point of the wall will be identified for excavation · · that wiJJ need to take place between the wall and the wharf pilings? If this point is compromised, what will be the effect on the integrity of the wall?

". ~.

~ ·. .

. .

: ·:·:· RKK 000315

0084.0002

.·

We have done some prelimjnary engineering that indicates that the extent of freezing can be kept at least 3 shaft diameters (9 feet) from the pilings. Of course, the proximity of the freezing wj)J depenct on the final Jocmion of the Soi1Free7.e wall, whkh has not been decided. We will have 50 or so devices in and near the wall that will monitor soil temperature the fuJI depth of the wall ( ll 0 to 120 feet deep) on a daily basis, or more frequently if necessary. Freezing is slow and we will have plenty of notice regarding the rate of freezing. During the design we will analyze the rate and extent of freezing with TEMP/W, a fini te difference program that we have used on dozens of projects with great prediction of actual freeze behavior.

We also plan to perform a freeze/thaw strength test to determine the actual reduction in strength of the soil after it thaws out. Based on the literature of previous testing, the reduction after one cycle should not be significant. We also have the capability of evaluating the impacts of a reduced soil strength some distance from the pilings using finite element programs. However, based on our extensive experience with soil strengths, we do not feel that this will be necessary. We do not feel that our wall wilJ . ha~e any significant impact on the integrity of the dtilled shafts. (GEl)

...

··. ·::

. 4). During the thawing process and dr~tlging of the wall, how will we be assured ~hat . . .

...... -. there will be no shifting or settling of the first row/rows of pilings? --- · :....·.. _· : ·. ... ·, Agrun referring to the response to ltetn 3, we will perform strength tests on thawed · .

'· ·. samples and perform engineering analyses to verify that thawing of the frozen \vall wi11 · ·.

not have an adverse effect on the drilled pilings. lf necessary, the pace of thawing will ~ · adjusted to manage this interface between the Soil Freeze wall and the wharf stn)cture a~d. ~void any ltd verse impacts of thawing on the pilings. (GEl) ·

.... .. .. 5) Earlier conversations indicated that a l5-20fl wide road would be needed on the: : :

·... ' outside of the wall for inspection. Is this still the case? ··· ·--

The actual amount of space needed wiJJ need to be worked out during the Soi!Freeze wall · ••• 0 design. Ways to reduce the width of the access road (and thereby the volume of fill ·· . .:.' placement in the water) include putting the chj]Jers on frames built above the SoiiFreez.e. ·: wall. (GEl) ·.. ;··...

.: ,• .'·. ·..

Please refer to our response to Item 7. (RKK) .·. . ...,· 6) How much time is required for thawing before the material can be dredged out · .· .-.: :· and what is the pro~ess for removal of the tubes? ·

After talking with Marvin, it appears that relatively little time will be needed since he :'... feels he can dredge out frozen soil without thawing. The wall wi11 start to warm up (and .., ... thereby loose strength) immediately after the freeze system is decommissioned. As we · . ,.·.

have said, it is possjbJe to design the SoiJFreeze wall so that the brine-circulation system . . is decommissioned in segments rather than all nt once(It may be possible to start - ·· · dredging within a week or two after the end of freezing and freeze pipe removal ~~EI}) _ ·. · :.

'. . . : ·.:

·.2

.· RKK 00p3_16 .

0084.0003

7) We understand that there may be as many as 40 chillers required for the initi<ll freeze. How much area will be required for these and what will you need in terms of electi"ical connections?

The dulling capacity required for the formation of the SoilFreeze wall to the engineer's design specifications depends on the total number of linear feet of steel pipe in the ground, the tightness of the placement of these pipes and other characteristics of the final design. The design of the above-ground components (manifolds, pumps, chillers, etc.) ·will match the details of the engineer's requirements and conform to the over:1Jl schedule, · ;may of methods al)d performance standards of the job. With that being said, the following is pur best guess at chiller requirements at this time.

The conceptual design submitted to Zachry and used as the basis for all discussions in the .last nine months assumes that there will be 168,000 LF of underground pipe, and thai initial freezedown will require the equivalent of 94 mobile refrigeration units in our own inventory. ·Each of these has a 6 x 12-ft. footprint and weighs between 4,500 and·5,000 .•'

lb. 'Each of these units will require an estimated 82 amps during the first week of freeze- down (50 amps after the first four weeks <.md 30 amps beginning in the ninth week). Of · course the Soi!Freeze system at Bayport will use f~wer, mo~e powerful and, when fully integrated, more.efficient chillers. Again, the number, refrigeration tonnage and weight of the chillers in the overall system configurati9n and the number of electrical panels will depend on the engineer's design. The placement of. the chiliers will take into accot.int'the · requirements of the Soi!Freeze system while being fully. compatible with other · ·~onsiderations, e.g. noise mitigati01i. (RKK) · ·'

'fiach of ihese responses can be given in elaborate detail. Sonie of them raise other ~ssues •vhiclt are no doubt worth discussing again now that subconti·dct 1iegotiations mul !he start of work are imminent.

For clarification and further disct;ssion, please coTJ(~~t ·

James Quirslund RKK-SoilFreeze T~clmologies, LLC ··... ·· (425) 861-6084 mobile (425) 766-1162 · jqr~itslund@soilfreeze.com

3

RKK 000317

0084.0004

TAB 19

Acceptance for Records of Main Freeze Wall Plan (PX88)

Document View Page 1 of 1

Submittal Item Project [C70- 1A-D01] -Bayport View Date 4/4/2007 Ph . 1A - Wharf and Dredging Wharf and C70-1A-D01 Dredging

Nathelyne A. Kennedy & Assoc. 6100 Hillcroft Suit e 710 Submittal Houston, TX 77081 Item No. 00700-014 Phone: (713) 988-0145

General Information

Item No. 00700- 014 Revision 0 Package No. Rev. 00700.0 Description Soil Freeze Wall Plan CSI Code 00700 - General Submitting Company Zachry Construction Conditions Corporat ion Reference No. Copies Required Status Received Item Type Responsible Team Rich Klassen (Zachry Construction Corporation) Member Item Notes Primary Response Accepted for Records Submission Notes

Dates

Material Required on Site Required Lead Time (days)

Approved Submittal Required Review Time 20 Required By (days) Submission Due

Linked Documents

Document Document Description Date Type Doc C70-1A-D01-00278 Tech Memo WD003 - Freeze Wall Submittal 8/12/2004 Require ...

Doc C70-1A-D01-00838 Tech Memo WD009 Freeze Wall Noise and Air Issues 1/17/2005 Doc C70-1A-D01-00987 Soil Freeze Wall - RKK info 3/9/2005

No. 2006-72970 ZCC EXHIBIT

88

file://D:\DocumentView.htm 6/24/2009

0088.0001

TAB 20

Transcript of April 5, 2005 Meeting (PX8)

NO. 2006-72970

ZACHRY CONSTRUCTION ) IN THE DISTRICT COURT

CORPORATION, )

Plaintiff )

VS. ) HARRIS COUNTY, TEXAS

THE PORT OF HOUSTON )

AUTHORITY, )

Defendant. ) 151ST JUDICIAL DISTRICT

*****************************

TRANSCRIPTION EXCERPT

CONSTRUCTION COORDINATION MEETING

APRIL 5, 2005

Minutes: 16:35 to 32:20

*************************************

Transcribed By: Keva Van Slyke

No. 2006·72970 ZCC EXHIBIT

8

0008.0001

1 Date:Apri15,2005 2 Minutes: 16:35 to 32:20 3 Requested Portion of Construction Coordination Meeting 4 (Andy Thiess helped identify the speakers 5 and some inaudible portions of this 6 transcription.) 7 MR. THIESS: Okay. Anyone have other 8 issues with the wharf? 9 MR. ANDERSON: Yeah I have two items I 10 want to bring up. We need to get like an official okay 11 about bringing this ship in on the west end of the 12 wharf. We have talked about it. We put it in, I think 13 the last time Mark was going to look at whether or not 14 there was a conflict with the electrical service that 15 went to the west. We haven't heard back. We've always 16 been - - since the beginning, we've been moving on the 17 basis that the ship would come in on the west end 18 rather than the east. 19 MR. ELY: You're talking about the barge 20 to unload the cranes? 21 MR. ANDERSON: Yeah. 22 MR. ELY: Okay. 23 MR. THIESS: Now, with this new potential 24 section it's really critical. 25 MR. ANDERSON: Yeah with the 330-foot

0008.0002

1 extension, it now almost mandates that the ship come in 2 on the west end. So we need to get something concrete 3 from the Port that says it's okay. Because under the 4 contract, I'm required to give you the east end. I just 5 need to get that clarified. 6 MR. THIESS: I think the best way would 7 be to get an RFI in and get it on the clock. 8 MR. ANDERSON: I think - did we not put 9 one in already? 10 MR. ROGERS: No. We were - - 11 MR. ANDERSON: I know we were talking 12 about doing it. All right. Let's get one in and let's 13 put some verbiage in it about the fact that with this 14 upcoming 330-foot extension it mandates that the ship 15 come in on the west end. The last - if I remember the 16 conversation the last time, I think even Mark said that 17 even if they unloaded at the west end it still wasn't 18 an issue because if they had to move the crane, they 19 could always tow it - 20 MR. GLASGOW: Tow it down. 21 MR. ANDERSON: Yeah, they could always 22 tow it wherever they needed to go. And from what I 23 understand, once the cranes are on the track, it's just 24 a commissioning issue. So they really don't have to 25 move anywhere. And so that's the - - that's the big.

0008.0003

1 issue that I have, is getting that 2 clarified. 3 MR. THIESS: Okay. 4 MR. ELY: Hang on just a second. If we 5 did that, if we pushed all the cranes - - how many cranes 6 are we getting, four? 7 MR. THIESS: Four. 8 MR. ELY: If we pushed all of the cranes 9 over to the west side, would we be able to hook up 10 temporary power to do the commissioning? 11 MR. ANDERSON: Oh, I would think so. 12 MR. ELY: Okay. Because I think that's 13 probably the only issue, right? Because the cables are 14 not going to reach that far. And so if we could run 15 just a temporary conduit across the deck, and I can get 16 power to the cranes, then I don't see any issue. 17 MR. ANDERSON: I don't see that being a 18 problem. We've come up with a design that we'll be 19 proposing to you guys on the freeze wall, where - - you 20 know, in this 330-foot extension, we are going to 21 design in a cutoff wall that will allow us to reach the 22 freeze wall and open 900 feet of it up while we 23 continue to work towards the east end. All right. 24 There,is one upcoming issue that we are going 25 to have that we have - we believe we have found a

0008.0004

1 solution to. We'll probably, once we finalize it, we'll 2 give it to you formal, but you may as well know about it 3 now. 4 There is - - the cutoff wall involves a sheet 5 pile bin wall structure being built about 8 feet wide 6 that the soil between the bin walls will be frozen. This 7 encompasses one B row piling right in the middle of it. 8 Now, the freezing is not the issue, because the pile 9 goes 40 feed deep or 50 feet deeper than the soil 10 that's being frozen - - 11 MR. THIESS: Andy, I'm sorry. One thing 12 with that - - how deep is the wall? 13 MR. ANDERSON: About 100 feet. 14 MR. THIESS: How deep is the pile? 15 MR. ANDERSON: Well, actually, it's 90 16 feet below zero, so 90 feet cuz elevation's plus 10 at 17 the top. 18 MR. THIESS: And the B row pile is -- 19 MR. ANDERSON: About 130. 20 MR. THIESS: Okay. So it's about 30 feet 21 below -- 22 MR. ANDERSON: Yeah, there's 30 or 40 23 feet of piling below the freezing matrix. 24 MR. THIESS: Yeah, but you still have 25 about 40 or 50 feet of affected skin friction of the

0008.0005

1 pile? 2 MR. ANDERSON: Yes. 3 MR. THIESS: All right. 4 MR. ANDERSON: Now, but that's not the -- 5 that's not our concern. The biggest concern is that in 6 the excavation process, eventually they're going to have 7 unequal pressure against that bin wall because we are 8 going to remove it on one side and you're to have the 9 dirt pushing on it. And then eventually it's going to 10 be 11 reversed. You're going to have water and air on the 12 other side. So there is a deflection in this - - in 13 this bin wall. And first blush says that the deflection 14 will be somewhere in the vicinity of 4 to 6 inches. 15 That was only done it based on a 16 two-dimensional model, so they are - - right now they 17 have new software we're programming on a 18 three-dimensional model to see if we can get a more 19 accurate look at the deflection. 20 The idea that we're using is that that one 21 specific pile will be drilled and cased to probably 42 22 or 48 inches, and then we'll establish a casing at 36 23 inches, in the middle of this secondary casing. That 24 will allow this casing to deflect with the wall and not 25 put any lateral pressure against the piling. Our

0008.0006

1 biggest concern is not the freezing, it's the lateral 2 pressure - - 3 MR. THIESS: Preloading - - 4 MR. ANDERSON: Yeah, preloading the pile. 5 And - - but I think that that, you know, I think that 6 that will solve the problem. I am fairly comfortable 7 with what I saw, if we can keep the movement contained 8 within that secondary casing, we should be okay. 9 MR. FARHAT: Do you have a sketch of what 10 you are talking about? 11 MR. ANDERSON: Well, I can draw it on the 12 board for you if you want to see it. 13 MR. ELY: How low would the casing go 14 down? 15 MR. ANDERSON: The casing is - - the 42 16 inch will go down as - - probably as deep as the - - what 17 do you call it - - how deep do we want? 18 MR. ELY: Would it go all the way to the 19 bottom of the sheet pile? Probably not, right? 20 MR. ANDERSON: No, it doesn't have to go 21 that deep. 22 MR. ELY: Right. 23 MR. ANDERSON: And that has to be - - and 24 obviously, once the -- 25 MR. ELY: See that's a design mod

0008.0007

1 basically. Is that what you're saying? Right? 2 MR. ANDERSON: Yeah. And what we'll do 3 is, when it comes time to remove it, divers are going to 4 have to go down and cut the casing off the outer 5 casing. 6 MR. ELY: You can't pull it, you mean? 7 MR. ANDERSON: Well, see, no, we can't 8 because we're continuing to build the deck over this - - 9 MR. ELY: Oh, you're going to leave it in 10 place? 11 MR. ANDERSON: Yes. 12 MR. ELY: Oh, I see. 13 MR. ANDERSON: Yeah, it's - - we intend - - 14 this cutoff wall is being designed in such a fashion 15 that we're still going to be able to build the subdeck 16 while the freeze wall stands there. 17 MR. ELY: I gotcha. 18 MR. ANDERSON: So even that freeze wall, 19 what we are going to do is when it comes time to do the 20 excavation, we'll do all of the excavation that we need 21 to do on it. And then eventually, divers are going to 22 go down and they are going to cut through the sheeting 23 off- 24 MR. ELY: (Inaudible) or whatever. 25 MR. ANDERSON: Yeah, a couple of feet

0008.0008

1 below the mud line, and we're going to cut the sheeting 2 wall down. All right. And then in that, we're then 3 going to cut the outer casing of the pile and be right 4 back to what we need. 5 MR. ELY: Could you back fill that casing 6 with some kind of hard material that - - 7 MR. ANDERSON: Sure. I mean, we -- 8 MR. ELY: Lean concrete or something. 9 MR. ANDERSON: I was going to say we can 10 pour - - we can pour concrete in the casing for all that 11 matters, in order to fill that void up. That would be 12 a no-brainer. We could easily do that. 13 MR. ELY: Okay. That's something our 14 Geotech will have to look at. 15 MR. ANDERSON: And we're not done on the 16 calculations, but I wanted to give you a head's-up. 17 Jerry, did you want me to show you what it - - 18 MR. FARHAT: Okay. Maybe -- 19 MR. ANDERSON: - - what we're going to do 20 is this (inaudible). We're looking at if this is the 21 freeze wall here, and we have the wharf face here, and 22 of course we have the piles here, and then we have B 23 row that sits in through here. All right. The bin 24 wall that we're talking about building is actually 25 shaped about like this, and runs all the way back to H

0008.0009

1 row, all right, and cut off here. What this does is, 2 this ties up into the freeze wall in this fashion which 3 gives it its stability. 4 This is the piling that is in question right 5 here. And what we want to do is, we want to put an 6 outer casing around that piling to allow this bin wall 7 to deflect as as needed. Because eventually, when this 8 is all excavated out, of course you've got this - - 9 you've got soil - - the worst case is when we've 10 excavated this side, and you haven't excavated this 11 side, and you have all this pressure of the soil laying 12 against this bin wall. 13 All right. So this whole thing is going to be 14 frozen, along with this. Eventually, what we would have 15 here is in the slope matrix, you've got the B row piling 16 that goes down here with the deck up above it. The 17 sheathing is going to be installed in the freeze wall at 18 this level. It's going to be well under the deck by 19 several feet. And this casing will more than likely 20 come into play in here, just enough depth to be able to 21 protect it from the deflection. Because once we get 22 into the soil, the bin wall is not going to move. 23 You know, once you get into the soil, the soil 24 is going to act as shoring to hold it in place anyway. 25 The deflection is going to occur primarily at close to

0008.0010

1 the top. 2 MR. FARHAT: Do you have only one bin 3 wall or just so many of them? 4 MR. ANDERSON: Just one. All this is is 5 that in the complete matrix of the freeze wall what 6 we've done now - - it used to be that the freeze wall was 7 going to end at this point. But now, with this 330-foot 8 extension, it's going to be extended out. Under our 9 current schedule, we have to finish the entire subdeck 10 before I can breach the freeze wall to bring the ship 11 in. It doesn't work if I got another three or four 12 months' worth of work. So at about - - at about the 900 13 foot mark, at this point, we are going to put the cutoff 14 wall so that I can take this freeze wall out when 15 necessary, whenever we're there. 16 MR. McKENNEY: You're going to drive that 17 casing in first and then drill it in? 18 MR. ANDERSON: Well, I think we'll drive 19 _.. we're probably gonna end up drilling it. 20 MR. ELY: No, we can't drive it. Our 21 permit doesn't allow it. 22 MR. ANDERSON: No, we can drive it. 23 MR. ELY: You can? 24 MR. ANDERSON: There's nothing in the 25 permit that says I can't drive it .

0008.0011

1 MR. ELY: Really? Okay. 2 MR. ANDERSON: In fact, the sheeting - - 3 it's about two days' worth of work to drive the 4 sheeting, so there's going to be a myriad of phone calls 5 and complaints and bitches while we are doing this for 6 two days. And then you guys can yell at me and slap my 7 hand and say bad contractor, and I say, okay, we won't 8 do it anymore. But - - 9 MR. THIESS: Well, the only thing is, I 10 remember when the GeoEngineers were talking about this 11 at the Port, they said that they might lose like 5 to 10 12 percent shear strength on the soil. So we might 13 just have to make that B row pile a little deeper, huh? 14 MR. ELY: There's going to be - - some 15 more discussion is going to occur, because the testing 16 that they've done shows there's no degradation after 17 that cycle. 18 MR. THIESS: Oh, really? 19 MR. ELY: But, you know, nobody is sure 20 if they believe that yet, so... 21 MR. ANDERSON: Okay. One of the things 22 we had talked about is taking that one particular piling 23 another 10, 20 feet deeper in order to pick up that skin 24 friction. And if that's what it's going to take for you 25 guys to get comfortable with it, I have no problem,

0008.0012

1 we'll take it down another 20 feet, you know, just to 2 get it. How much end bearings do you have on these 3 pilings? What percentage of end bearings on it? 4 MR. FARHAT: Oh, I don't know. They may 5 be 40 percent end bearing. I have to check. 6 MR. ANDERSON: Because, you know, as we 7 Get deeper in there, that soil becomes much, much more 8 stable, and you're going to pick up some additional end 9 bearing if I take it another 20, 30 feet, plus the 10 additional skin friction. Okay? So I just - - like I 11 said, this is just the first blush to give you an idea 12 of what's coming when we give you the - - when we get 13 this pricing together for the 330-footer, that - - 14 MR. THIESS: It's going to include that. 15 MR. ANDERSON: - - it's going to include 16 the cost of this. RKK is already working on the 17 engineering calculations and stuff to be able to make 18 sure that we're not - - that this piling is not going to 19 cause us a problem. All right. 20 MR. THIESS: So what we will have is 21 stamped engineering on that pile. 22 MR. ANDERSON: Yes, yes. 23 MR. THIESS: Okay. 24 MR. McKENNEY: If he drills that in 25 there, how's Bobby gonna have - - is he going to still

0008.0013

1 have a 36 inch shaft? 2 MR. ANDERSON: He's going to set another 3 casing inside the - - yes. It will be a double-cased 4 pile. 5 MR. ELY: Just make sure when they do 6 that, when they do the analysis, make sure they include 7 the stiffness of the shaft - - 8 MR. ANDERSON: Okay. 9 MR. ELY: Because I mean, a lot of times 10 what people will do is, they go down and say, oh, the 11 deflection is pretty small down here, so we're not 12 going to include that. But make sure they include that 13 stiffness. Because even a small deflection below ground 14 will cause a lot of stress in concrete piles. 15 MR. ANDERSON: Yes. Yeah, we're going to 16 take the casing probably down to the relief point. And 17 it - - itisn't - - 18 MR. ELY: The (inaudible) point you mean? 19 Well, okay (inaudible.) 20 MR. ANDERSON: Yes, yes. And I don't 21 believe that the point is going to be very deep into the 22 soil, because it's pretty damned stiff as you start 23 dropping down to that level. Remember, in the B row 24 piling, we're actually into that 45-foot sand strata, 25 all right, and that's going to give us some pretty good

0008.0014

1 holding force. 2 MR. THIESS: Okay. All right. Anyone 3 else? Is that it, Andy? Is there anything else? 4 Anyone else comments on the wharf? I have one comment 5 I'd like to - - we have one outstanding submittal on the 6 welding. And it's for - - for the wharfside for the 7 supplies. The QC or the welding rod, electrodes, we need 8 to get that and finish out. Otherwise you're not - - 9 you're not 100 percent passing your welding - - 10 MR. ANDERSON: What do you need, just the 11 (Inaudible) the rods? 12 MR. THIESS: No, we need the QC 13 procedures, the dry control box, the storage - - 14 MR. ANDERSON: Oh, oh. Yeah, yeah. 15 Gotcha. 16 MR. THIESS: Like to have that. Okay. 17 That's it. If no one else has anything on the wharf, 18 we'll move to the container yard. 19 (End of requested portion of 20 Construction Coordination Meeting.) 21 22 23 24 25

0008.0015

1 ,STATE OF TEXAS) 2 COOPt OF HARRIS) 3 ~ REPORTER'S CERTIFICATE 4 ~I, ~L. Van Slyke, Certified Shorthand Reporter, 5 in a;jlj)6or. ~6tate of Texas, hereby certify that the 6 f~Oi~~ a c~ect transcription from the audio 7 recor~gs ~)fiS~O me by counsel. 8 ~~~~+f~~er ~~ifylthat I (9 u~'?J am neither attorney nor 9 coun~for~~lat~o, nor employed by any of the to parties &&,he ~~~nQ'~hich this recordi ng was taken. ii Further, I ~ot ~~lat)~ or employee or any attorney i2 of record in t~~cau~ 1~V'/ n~Am I ~.' .-~ have a financial 13 interest in the act~. ~ O~+ 14 0~ ~~ ~r Certified by me th~e~th day of August, 2009.

15 16 ~.,t..• 17 18 19 Keva L. Van Slyke, CSR Texas CSR#3481 20 Expiration Date 12-31-09 21 Sunbelt Reporting & Litigation Services 22 6575 West Loop South, Suite 580 Bellaire, Texas 77401 23 (713) 667-0763 24 25

0008.0016

TAB 21

April 13, 2005 Proposal for Wharf Extension (PX9)

ZACHRY April 13, 2005

Port of Houston Authority Mr. Mark Vincent, P.E. Bayport Project Engineer P.O. Box 2562 Houston Texas, 77252-2562

Correspondence 1172340405004

Re Contract: Bayport Terminal Complex Phase IA Wharf and Dredging Contract

Subject: Price Quote - JJO foot Wharf and Dredging Extens ion

Dear Mr. Vincent,

As per your request we offer The Port of Houston Authority the following price quote for the JJO foot Wharf extension.

Lump Sum Price $12,872,000.00 ** .. Price is based on:

• Current design • Uninterrupted work process • Current construction methods • Deliv.ery of the gantry cranes at the west end of the-wharf • Use ofa freeze waIl- cut offwaIl, encompassing one (1) "B" row piling • No outfall structure is included • Wet Dredging will be at a unit price based on 80,000 cubic yards, actual yardage will be determined by pre-dredge survey and adjusted at $8.89 per cubic yard .

• Wet Dredge Placement will be based on 80,000 cubic yards, actual yardage will be determined by pre dredge survey and adjusted at $4.50 per cubic yard

Should the POH approve the use of the Geostar Fabri-form revetment system for the entire wharf length (1990 It) a deduction of$892,281.00 for the entire wharf length (I 9901t) can be taken, for an adjusted lump sum price of $11,979,719.00

If you have any questions, please do not hesitate to contact me.

cc: Fred Lueck No. 2006·72970 Greg McVey ZCC EXHIBIT File

9

P.o. 80>11968 'La Porte, TX 77572' (281) 474-3176' (281) 474-4925. fax' www.zachry.com

ZCC-34-D50410

0009.0001

TAB 22

May 18, 2009 Proposal for Wharf Extension (PX179)

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.... ,

Ij ZACHRY May 18,2005

Port of Houston Authority Correspondence # 723405008 Mark Vincent, P.E. Bayport Project Engineer P.O. Box 2562 Houston Texas, 77252-2562

Re Contract: Bayport Terminal Complex Phase lA Wharf and Dredging Contract

Subject: Price Quote - 330 foot Wharf and Dredging Extension

Dear Mark,

As per your request we have reviewed our offer for the 330 foot Wharf extension, Zachry Construction Corporation would like to thank you for the opportunity to review our quote for this additional work, however after our review we have concluded that the original offer is our best price.

Lump Sum Price $12,572,000.00 **

** Price is based on:

• Current design • Uninterrupted work process • Current construction methods • Delivery of the gantry cranes at the west end of the wharf • Use of a freeze wall - cut off wall, encompassing one (1) "B" row piling • No outfall structure is included • Wet Dredging will be at a unit price based on 80,000 cubic yards, actual yardage will be determined by pre-dredge survey and adjusted at $8.89 per cubic yard • Wet Dredge Placement will be based on 80,000 cubic yards, actual yardage will be determined by pre dredge survey and adjusted at $4.50 per cubic yard

Should the POH approve the use of the Geostar Fabri-form revetment system for the entire wharf length (1990 If) a deduction of $592,281.00 for the entire wharflength (l9901f) can be taken, for an adjusted lump sum price of$11,979,719.00

If you have any Questions please do not hesitate to contact me.

\~( \ .i., \._-----====-:> ~'Anderson Project Manager No. 2006·72970 Cc: File, Fred Lueck, Greg McVey ZCC EXHIBIT 179 Zachry Construction Corporation P.O. Box 1968 -La Porte, TX 77572· (281) 474-3176· (281) 474-4925, fax· www.zachry.com

ZCC23 000488

0179.0001

TAB 23

July 11, 2005 Proposal for Wharf Extension and Ditch K (PX219)

·.ifA\

July II, 2005 ZACHRY. .- -.......

aOp y . . .

.'

Port of Houston Authority Jim McQueen, P.E. Bayport Project Engineer . P_0. Box 2562 Houston Texas, 77252-2562

Re Contract: Bayport Terminal Complex Phase lA Wharfand Dredging Contract

., Subject: 332 foot Extension and Ditch "K"

Dear Mr. McQueen,

..' .Based on our meeting of July 8, 2005 the following additions and clarifications are ~fferedtothe pending change order for the 332 foot extension and Ditch UK".

• The total linear feet of drill shafts in the 332 foot extension shall not exceed 2] ,266.50_ • Any additional length of drill shaft in excess of21,266.5 shall be billed at a rate of$82.00 per liner foot.

• Any reduction in the total length of drill shafts less than 21,266.5 shall be a credit to POHA at a rate.of $43.00 per linear foot.

• . Price is based on ZCC having a working design and drawings for drill shafts no later that 8/12/05•.

• Price is based on ZCC having a working design and drawings for the Wharf Deck no later.

than 11/25/05.

• The contract completion deadline for the Bayport Terminal Complex Phase IA Wharf and Dredging Contract shall be extended to 8/15/06.

• Price is based on a drill shaft design diameter no greater than 36"; any increase in the design diameter over 36" will be subject to a re-quote.

• zce's quoted price for the 332 foot extension shall be increased $5,506.00 to cover the . construction of a temporary drainage swell along the south face of the extension.

• ZCC'S quoted price for the 332 foot extension shall be increased $10,000.00 to cover the installation of an 8' high chain link fence along the South face of the extension..

• . The dredging quantity shall be based on I ]0,000 cubic yards. • ZCe's adjusted base price for dredging shall be $] ,446)500.00 based on a unit price of $13.15 per cubic yard on a base dredging quantity of 110,000 cubic yards.

• Any quantity dredged in excess of the base quantity of 110,000 cubic yards shall be at a rate of $13.1 ~ per cubic yard.

• Any quantity dredged short of the base quantity of 110,000 cubic yards) the remaining balance of the yardage to equal 110,000 cubic yards shall be paid to zee at a rate of $0.54 per cubic yard; this equals a credit to'POHA at a rate of$12.61 per cubic yard on the under dredge quantity.

P.o. BOl(1968, La POJ1e.1)( 77572' (281) 474-3176' (281)'474-4925. fax ·WW'W.zachry.com ZCC23 001492

No. 2006-72970 ZCC EXHIBIT 219 0219,0001 .'

li'ZACHRY

• Work hours for all associated work on Ditch "K" shall be 12 hours per day. 5 days per week • Completion time for Ditch "K" shall be 5 months from receipt of the signed change order.

• All costs associated with inspectors and testing labs for the extended work hours for Ditch "K" shall be the responsibility ofPOHA.

Based on the above clarifications our quote changes as follows:

• Lump sum price for Ditch UK" $ 2,215,702.00 . • . Lump sum priceexcluding drill shafts and' dredging is s 9,772,447;()0 • Drill shafts add 21;266.5 liner feet at $82.00 per liner foot . $ 1,743,853.00 ..

.

: ~.'

• Dredging add 110,000 cubic yards at $13.15 per cubic foot .$ 1,446,500.00 Total value SI5,178,502.00

. Sincerely,

.

~~'k "And~ 0 ;> Project Manager .

cc: Fred Lueck ; 0 ••

Greg McVey File

P.O. Box 1968· La Porte, TX 77572' (281) 474-3176· (261) 474-4925. fax' www.zachry.com ZCC23 001493

0219.0002

TAB 24

Request for Port Commission Action for Execution of Change Order 4 Signed by Port Facilities Director James Jackson and Chief Engineer Steve DeWolf with origination date of July 18, 2005 (PX224)

••, •'• , , .<-•, • ' • ,. a

!

R6est fo~ P_o rt Commission A.n To: Executive Director t . .·..; Subject: Category G Page Minute # ~ Execute a Change Order to Zachry Construction Award 1 of 1 Corporation for Bayport Terminal Complex Phase 1A Wharf and Dred in - Wharf Extension From (Deparbnent or Other Point of Origin): Origination Date: Ag9nda Dale:

artmenl Ju 18, 2005 Ju 25. 2:;:00.::;.5=----1 Depal1ment Affected: Operations Division

Dale and ":"ype of Prior Authorizing Commis!'ion Actlon: Minul.e 2004-0524-013 Award Recommendation: (Summary) Recommendallon for Authority to Execute a Change Order to Zachry Construction Corporation for Baypor1 Terminal Complex Phase 1A Wharf and Dredging in the Estimated Amount or $12,962,800 Amount of Funding: Executive Director Signature: Estimated $12,962,800

Recommendation:

By Minute 2004-0524-013, the Port Commission awarded a COi'ltfac\ in the estimated amount of $62,485, 733to Zachry Construction Corporation for Bayport Tenninal Complex Phase 1A Wharf and .Dredging.

The initial contract provides for a 1,660-foot wharf. Projected increases in demand ft:rr containerized cargo will require two 1,000-foot berths at terminal opening. Exte:-:ding the wharf 332 feet under the current contract is feasible and wm assure the reQuired berths are available. Construction of the extension can only be conducted within lhe schedule by the present Wharf and Dredging contractor because of construction structures currently in place which cannot be removed or relocated withou1 adversely affecting on-going wharf construction.. Additionally, the current contractor's unique method of construction is the only practicable means of achieving strict emissions requirements for this contrac1. The contractor has submitted a proposal in the estimated amount of $12,962,800 for the 332 root wharf extension. The Engineering Department and the Phase 1A Program Manager have reviewed the contraclo(s proposal and found it to be fair and reasonable.

It is therefore recommended that the Por1 Commission at its July 25, 2t1()5 meeting authorize a change order in the estimated amount of $12,962.800 to the Zachry Construction Corporation contract for Bayport T enninal Complex Phase 1A Wharf and Dredging and that such action further au1horize the Executive Director to do any and alllhings in his opinion reasonable or necessary to g..:Ye effect to the foregoing.

006.016.033.Z6Z

V.LM.CJL.tk PHA 0014992 ExHIBIT NO.\~~

Jo... 1q -o 7 :::J1.f

No. 2006-72970 ZCC EXHIBIT 224

0224.0001

... -: ·. :· ,·· ·

·' J'

• • Change Order to Zacllry ConstnJ<;tlon Corporation for-

Bayport TenninaJ Complex Phase 1A Wharf and Dredging-Wharf Extension

Dascription: · Staff recommends construction of a 332' wharf extension to the current contract. Additional work is necessary because of projected demand for lhe terminal and anticipated ship size requires two 1,000-berths. and the current contract provides oniy 1,660 feet of totat wharf length. Because of the current construction of the freeze _ waR and other Zachry construction processes, a wharf extension cannot feasibly be performed by another contsactor working ooncurrenUy. Additionally, Zachry's method of ronstructing the wharf in the dry significantly reduced project emissions; construction of the wharf by another contract using typical methods would not reduce emissions to a level that would enable this and subsequent contracts to proceed as scheduled. Estimated cost of the wharf extension is $'12.962,800.

Engineer: DMJM-Hanis. (Non-SBE) $2,233,611

Action Requested: E5cecut~ a Change Order lo Zachry Construction Corp.

Change Order Estimate: Original Contract: $62,485,733.00 Change Order No. 1: $ 3,645,320.00 (Cruise Dredging) Change Order No. 2: $ 28.111.12 (Reinforcement) Change Order No. 3: $ 154.898.82 (BuD nose)

For HTK Only

006.016.038263

PHA0014993

0224.0002

TAB 25

September 9, 2005 Frozen Cutoff Wall Design (PX10)

GEoENG!NEERS MEMORANDUM

PLAZA600 llUILDII'G. 600 STEWART STRoiOT, SUITE 1420, S:ATTLE. WA 93101, 'rELiOPnvNE: (206) 728-26(4, FAX' (206) 728-2732 vNNI.geoengineerS.CDm

To: Larry Applegate - SoilFreeze Technologies Charles Rogers Zachry Construction FROM: Daniel Mageau, P,E. - GeoEngineers DATE: September 9, 2005 FILE: 6700-014-03 SUBJECT: Houston Bayport Phase lA Wharf FROZEN SOIL SHORING Draft Cutoff Wall Design

GEl Seattle: P;/6700014/02/lVlemosICU101f Wall Design.Dra11-9-905.doc

INTRODUCTION

The purpose ofthis memo is to present our draft design for a temporary cutoff wall near the middle ofthe Phase IA wharf for the Houston Bayport project. The cutoff wall 'will allow Zachry to complete the excavation and construction of the two-third (approximate) of the wharf so that this portion can be ready for the Port in February 2006. The remaining eastern portion, as well as the 330-foot extension, will then be completed after that time with the cutoff wall separating the east and west portions, The cutoff wall will be comprised of a combination of frozen soil and steel sheet piles to provide retention of soil and groundwater during construction and excavation. This wall will then be removed from the final grade up, in the same fashion as the primary frozen soil shoring wall that runs east-west in front of the wharf. However, the wharf deck will cover most of the cutoff wall and therefore, wall removal will need to be accomplished in water by divers after both sides are excavated out. As this design is draft and presented to the construction team for comments, some refinement of the details presented herein may be appropriate. A final version, together with a drafted set of plans will be prepared afler comments from the construction team and Port consu ltants, as appropriate: have been incorporated.

CUTOFF WALL DESCRIPTION

The cutoff wall 'will be located perpendicular to the wharf at drilled shaft line no. 59.5 (Station ~81+50), as shown on the attached plan, Figure 1. Zachry has left this portion of the pile caps and decking open to allow access for installing the cutoff wall. After the cutoff sheet piles and freeze pipe system are in place, Zachry will complete the closure section of tbe decking.

At its deepest point near A-Line, the cutoff wall \'\1.11 need to retain soil and groundwater from the design water level elevation of +8 feet MLL W to the bottom of the excavation (-53 feet Elevation after the keyway is backfilled), for a total free-face height of 61 feet. South of A-Line, the height of the wall will reduce at a rate of2H:1V, following the final grade of the slope as shown in Figure 2. The south wall will end about 4 inches from the from the Il-line piles. The north end will be embedded WIthin the primary frozen soil shoring wall,

The sheet sheets will be AZ26 steel sections driven to depths ranging from about 6 to 15 feet below the bottom of excavation (-9 to 18 feet below the bottom of final grade). The soil in between the two sheets will be frozen using primarily 2 to 3 rows of freeze pipes in the 8-foot-wide wharf area plus additional rows in the wider area between the wharf and the primary frozen soil shoring wall. A detail plan view of the sheet pile

DISCLAIMER: Any electronic form, facsimile Dr hard copy of the original document (email, text. taote, and/or figure}, if provided, and any attachments are only a CODY of the original document. The original document is d b GeoEngineers, Inc. and will serve as the official document of record,

lCC-40-009166

0010.0001

Memorandum to Larry Applegate(SoilFreeze) and Charles Rogers (Zachry) September 9, 2005 Page 2

sections and the freeze pipe layout for the 8-foot zone is shown in Figure 3. These freeze pipes will extend down to depths of 80 to 100 feet, as shown on Figure 2 to provide additional lateral support and to cut off groundwater within the dense sand layer encountered in borings between about 55 and 75 feet in depth. The top of the frozen ground in between the steel sheets will be at Elevation +8 feet, the same as the primary frozen soil shoring wall. The top of the steel sheets will be at Elevation +9 feet, one foot above the soil inside, to provide a buffer from waves and to contain brine manifold lines. A whaler consisting of a W12x79 section will be attached to the top of the wall. Steel Lies located just below the ground surface and spaced at 8 feet on center will be installed through the two sheets and whaler to provide a positive connection of the two sheets at the top. A detail cross section at the top of the wall is shown in Figure 4.

ENGINEERING ANALYSIS

One of the key elements of til is design is to limit the horizontal wall deformation, and therefore deformation of the soil retained behind it, to a small amount such that this movement will not adversely affect the structural integrity of the drilled shafts that support the wharf. 1\ second key element is to limit the growth of the frozen soil such that it does not freeze these same drilled shafts.

We completed dozens of thermal and structural finite-element analyses to evaluate the expected deformation of the frozen soil/sheet pile cutoff wall. To optimize the thermal aspects, we used TEMP/W, a 2D finite element thermal model program. To evaluate the deformation of the wall under various loading conditions, we used both 2D and 3D versions of PLAXIS, a finite element soil/structure model. The 2D TEMP/Wand the 2D PLAXIS programs are discussed in more detail in our report for tile primary frozen soil shoring wall, dated February 4, 2005. The cutoff wall is a high, wide, stiff structural element that is essentially fixed at each end (the frozen soil shoring wall at the north and the slope at the south). Without the embedment at the wall ends, our 2D analyses indicate that wall horizontal movement after one side is excavated in the dry will likely be excessive. The end effects of this wall can only be evaluated using a 3D model as discussed in a subsequent section.

THERMAL ANALYSES

We analyzed numerous freeze pipe layouts and brine temperatures using TEMP/W to evaluate the impact on 1) the average temperature of the soil within the steel sheets and 2) the extent of frozen soil into the ground relative to the wharf piles. The two goals are opposite. Colder brine and more freeze pipes freezes the soil colder, which results in stronger and stiffer ground and very small wall movements, however, frozen soil extends outward past the sheets over 5 feet, the approximate distance to the wharf piles, after 3 or 4 months of freezing. Warmer brine and less freeze pipes and limits the extent of frozen ground so that it does not reach the existing wharf piles, however, the frozen soil is less strong and wall movements will increase. Our thermal analyses were completed to optimize the freeze system to satisfy both constraints.

Our analyses indicate that the optimal layout of freeze pipes is as shown approximately on Figure 5. These results from TE\1P/W show a close-up view of an 8-fa or-wide section of wall beneath the wharf that includes seven freeze pipes, the steel sheet and one of the existing drilled shafts. The overall layout of freeze pipes is shown in Figure I and includes freeze pipe locations in the wider zone of the wall north of tile wharf. Most of the 8-foot section has 2 rows of freeze pipes spaced at ~4 feet (4. J 3 feet = I per 2 AZ26 sheets) that extend down 80 to 100 feet in depth to cut off groundwater in the dense sand and provide adequate structural stability. Five extra freeze pipes are to be installed as a third row in tbe highest P3.1.t of the wall between A and D lines. Our plan is to freeze down the soil in between the freeze pipes as quickly as practical using cold brine in all three rows of freeze pipes. After 2 months or so of freezing, the outside rows will be maintained

ZCC-40-009167

0010.0002

Memorandum to Larry Applegate(SoiIFreeze) and Charles Rogers (Zachry) September 9,2005 Page 3

to about +20F while the inside row is maintained at -20F. This limits frozen soil growth to more than 1 foot from the wharf piles after 6 months of freeze, as shown in Figure 5. The extent of frozen ground is progressively less with less time of freezing. To accomplish this zoned type of freeze control, SoilFreeze will need to install two separate freezing systems for this wall. The colder freeze section will be applied to those freeze pipes encircled on Figure 1. The single black dots on Figure I represent pipes connected to a variable freeze system. The average ground temperature inside the sheet piles is maintained below 20F, even in the wanner freeze section, which is needed to provide sufficient wall stiffness and strength, discussed more in the following section.

Some modification of the brine temperatures will be needed during the project, the extent of which will depend on the specific ground response to freezing. As with the primary wall, ground temperatures will be monitored throughout the process so that we can change the brine temperatures as appropriate to maintain cold temperatures inside the cutoff wall while limiting frozen soil growth outside.

After the first (west) side of the wharf is excavated, the west side of the sheet pile wall will be exposed. At this time it will be necessary to spray the surface of the steel with foam insulation. Tile insulation is needed to prevent the soil inside the wall from melting when this west side is filled with water.

P~SSTRUCTURALANALYSES

The frozen soil temperatures obtained from TEMP/W, discussed above, were used to obtain frozen soil strength and stiffness values for use as input to PLAXlS 3D. 1110 problem is quite complex to model and required nearly 10,000 elements as illustrated in Figure 6, which represents the 3D grid for this analysis. We completed several dozen computers run varying wall geometry, frozen soil strength, sheet pile sections and other variables in order to develop a solution that results in little wall movement and moderate wall thickness and depth. We also performed a series of 2D PLAXIS analyses to evaluate the relationship between wall/soil movement and the impact on the drilled shafts. These:2D analyses indicate that up to about 2 inches of soil deflection near the piles before the onset of plastic hinging. The results of the PLAX1S J D analyses indicate the maximum horizontal wall movement will be on the order of I inch for an eight foot wide wall that utilizes AZ26 sections embedded as shown in Figure 2. This results in a factor of safety against plastic hinging of 2. This deformation estimate is considered to be a conservative estimate because we did not include the positive effect of the numerous concrete piles or the whaler on reducing soil movement in our modeling. Based on these analyses, it is our opinion that the cutoff wall should retain soil and groundwater after excavation on one side is completed with little wall movement which should not impact the existing wharf piles.

The cutoff wall is located in between pile rows 59 and 60, which are 20.5 feet apart. The steel sheets will be located about 5 feet from the wharf piles along these rows. Line B has additional piles so that one of Line B piles is located within the cutoff wall, as seen on Figure 1. To reduce the impact of the cutoff wall on this one pile, we have included a 42" to 48" diameter casing to be installed around the Line B pile before the start of freezing. The purpose of the casing is to protect the Line B pile as the wall moves during excavation. If it was embedded in frozen soil, the very rigid cutoff wall movement may exert undue forces on this pile. The collar will extend to the bottom of the excavation. The annulus between the pile and the casing will be cleaned out by Zachry and air will remain in the annulus throughout the life of the cutoff walL As the cutoff wall moves laterally the estimated 1 inch during excavation, the Line B pile will remain vertical and untouched by the wall within the zone above the excavation depth.

lCC-40-009168

0010.0003

Memorandum to Larry Applegate(SoilFreeze) and Charles Rogers (Zachry) September 9, 2005 Page 4

Attachments: Figure 1 - Plan View of Cutoff Wall Figure 2 - Section View of Cutoff Wall Figure 3 - Detail of Freeze Pipes and Sheet Pile Wan Figure 4 - Section Detail near Top of Cutoff Wall Figure 5 - Typical results from TElvlP/W Analyses Figure 6 - Grid of PLA...XlS 3-D Model

ZCC-40-009169

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Houston - Cutoff Wall - 2m ~ ~ ProJ<oct nama Data IUsernama 6o 09/09/05 I GeoEngineers, Inc.

Finite Element Code for Soil and RockAnafyses I C:7oo- 0,"1- 03'

o to -> Version 1.1.3.16 o ~ "-l Ql o o o ~ o

TAB 26

Transcript of September 13, 2005 Weekly Construction Coordination Meeting (PX274)

274

1 IN THE JUDICIAL DISTRICT COURT OF HARRIS COUNTY, TEXAS 2 3 ZACHRY CONSTRUCTION )

CORPORATION, )

4 )

Plaintiff, )

5 )

V. )

6 )

PORT OF HOUSTON ) CAUSE NO.

7 AUTHORITY, ) 2006-72970 )

8 Defendant. )

)

9 )

)

10 ) 11 12 13 14 Weekly Construction Coordination Meeting 15 Date: September 13, 2005 16 Minutes: 05:00 - 5:34 17 18 19 20 21 22 23 24 25

No. 2006·72970 ZCC EXHISIT

1 Audio Reporting Transcribed by: 2 3 JENNIFER HAYNIE ALPHA REPORTING CORPORATION 4 236 Adams A venue Memphis, Tennessee 38103 5 901.523.8974 6 7 Proper names and inaudibles or undiscemible 8 testimony was provided Andy Anderson. 9 10 11 12 ·. 13

3

1 Date: September 13, 2005 2 Minutes: 5:00- 5:34 3 (Requested portion of weekly Construction 4 Coordination Meeting.) 5 ANDY THIESS: All right. The next 6 issue the pile redesign for the cut off wall. I 7 saw that y'all put that in yesterday. So we'll 8 get that sent off to the designers. Jim, do 9 you see any issues if the designers are 10 okay with things? This isn't going to be an 11 approval type thing, it's gonoa be a-- 12 JIM MCQUEEN: No. Uh-huh. Just 13 whatever the designer wants. 14 ANDY THIESS: Okay. So that's in 15 progress. We'll leave that open. 16 (End of requested portion of Weekly Construction 17 Coordination Meeting.)

TAB 27

Email string between Andy Thiess and Jeff Ely and others dated September 14, 2005 (PX11)

From: Ely, Jeff/HOU S ent Wednesday, September 14,2005 12:26 PM .• Johnson, Robert/HOU; Emsley, Laurencefi-:IOU - <,:< ~ect FW: Sub. Item No. 00700-015.0 CutoffWall Design

Bob/Laurence:

Forgot to CC you on this . -----Original Message----- From: Ely, Jeff/HOU Sent: Wednesday, September 14, 2005 1:26 PM To: Thiess, Andrew/HOU Subject: RE: Sub. Item No . 00700-015.0 cutoff Wall Design Andy: We need to tal k about this a little and decide how to proceed. As we talked about last week,. thi s i s mostly a geotechnical p r oblem, so I think Geotest shoul d probably take the lead, but I'm not sure if they have any budget ava ilable.

The first thing we need to do i s verify the freeze wall won't reduce the capacity of the permanent pier s .We for sure need Geotest f o r that. Jeff

- ----original Message----- From: Andrew Thiess [mailto:system@const ructware.com]

-~t: Wednesday, September 14, 2005 10:06 AM : · ·. Ely, Jeff/HOU · -::' ....>ject: sub. Item No. 00700- 015.0 Cutoff Wall Design Jeff, Please review and coordinate response to this submi ttal. We may not need to approve this, but we need due diligence to identify and communicate any technical issues we may have. Due f rom designers Sep 28.

No. 2006-72970 ZCC EXHIBIT

11

~ ExHIBIT NO. / f!Cf 11-o'--o?:rH

CH2MHILL034723

0011.0001

TAB 28

Memorandum dated September 14, 2005 from Port Facilities Director Jackson to Port Executive Director Kornegay recommending approval of Change Order 4 (PX3)

.·· ... ...... . . . .. .

,• .. - ... ~- ,•· ...

--:---... ( ( INTER-OFFICE MEMORANDUM

Date: September 14.2005 File: 2004..0187

To: Mr. H. T. Kornegay

From: James B. Jackson

Subject: Recommendation for Approval of Change Order No. 4 in the Estimated Amount of $12,962,800 to Zachry Construction Corporation for Bayport Terminal Complex Phase 1A Wharf and Dredging

By Minute 2004-0524- 13. the Port Commission awarded a contract in the estimated amount of $62.485.733 to Zachry Construction Corporation (ZCC) for Bayport Terminal Complex Phase 1A Wharf and Dredging.

The initial contract provides for a 1,660-foQt wharf. Projected increases in demand for containerized cargo will require two 1,000-foot berths at terminal opening. Extending the wharf 332 feet under tpe current contract is feasible and wilt·assure the require<! berths are available. Construction of the extension can only be conducted within the schedule by the present Wharf and Dredging contractor because of construction structures currently in place which cannot be removed or relocated without adversely affecting ongoin'g Wharf construction. Additionally, the current contractor's unique method of construction is the only practicable means of achieving strict emissions requirements for this contract. The contractor has submitted a proposal in the estimated amount of $12.962,800.forthe 332-footwharf extension. The Engineering Department and the Phase 1A Program Manager have reviewed the contractor's proposal and found it to be fair and reasonable.

By Minute 2005-0725-18, the'Port Commission authoriZed the issuance of a Change order in the .. , _. . . estimated amount of $12',962,800 to Zachry Construction Corporation for the above described changes. Accordingly, please sign the attached change order and retum it to the Engineering Department for further handling.

JBJ/SHD/MV:ry ~o' of Fad•Hes

Attachment No. 2006-72970

C: Mr. Andrew Thiess. P.E.- CH2M HILL, Inc.

ZCC EXHIBIT Mr. Forbes Baker Mr. James Turner 3 Mr. ::,a~k Vincent, P .E. Mr. Jim McQueen. P.E.

Deponent__,=----- /- ;c!-octRptr.-- · Date \ www.o£P()8001:.COM \

~ ... ·· PHA0013572

0003.0001

TAB 29

McQueen email to Thiess dated September 15, 2005 (PX280)

To: Ardrew.Thiess@CH2M.com <Andrew.Thiess®CH2M.com> From: James McQueen Cc: 'Robert.Johnson@CH2M.com' <Robert.Johnson@CH2M.com> Bee: Received Date: 2005-09-15 06:42:00 CST Subject: ZCC SCHEDULE

ZCC will be paid for july even though they show late and not in accordance w/Extension Agreement. Our management is afraid ZCC will back out of the extension agreement. Do as you do on any schedule you do not agree with Andy.

No. 2006-72970 ZCC EXHIBIT 280

P - El e 0 060 33

0280.0001

TAB 30

Change Order 4 (PX12)

County Auditor's Fonn 5107 Harris County, Texas (Rev. 2191)

Port of Houston Authority Change Order No. ~ Increase: X Decrease: No Change:

To: Zachry Construction Corporation Contract No. : 2004-0187

Address: 527 Logwood San Anlonlo, TX 78221-1738 Dale:

Subject : PrDject - BavoDrt Tenninal CDmplex Phase 1A Wharf and Dredging Contracl

Gendemen:

The change set cut below was not contemplated in the subject contract dated 512412004 • but is necessary tor the orderly completion of the prDject. You are authorized to proceed with the modification on the basis of payment below.

Description of Change: ConstruCl a 332' wharf extension to the previously specified 1.660' Wharf. in accordance with the attached Scope. TIme and Price ModlficatiDns.

Original Contract Amount: $62,485.733.00 (Est.)

Basis of Payment:

PreviOUS Change Orders : $3.683,331.12 (Est.)

Item Unit Unit Price Quantity Total

Perform the above described additional war!<in accordance with your proposal dated July 11. 2005, for the fDllowing consideration:

1 . Construct 332' of Wharf Extension NTE $12,962,800.00 1.00 $12,962,800.00

Port Commission AuthQ,.ization When AppJicabre : Total This Change: $12,962.800.00 ........

Minute Number: 200s-on5.18 New CDntrad Amount: $79,131,864.12

08/29/Q5

:i:: '11 aUjabe ZZ th~ ~~Iion, / ;;• ~-- ~..

;

t:ftdI. / '-....... Auditor #.

/ '" . ..-/1,"0i'".

J . ./ U,;.yH'ft?t'·' '!/. /M-.:¥~ Purchase Order No.: ~ / /' Bond Fund: CP Account Number: 379-13310-7723

No. 2006·72970 ZCC EXHIBIT

12

Contractor Auditor Central File Engineering Fils ACCDunts Payable Purchasing T.lenoir Inspector

005.010.019067

PHA0012045

0012.0001

CHANGE ORDER ROUTING MEMORANDUM CONTRACTOR: Zachry Construction Corporation FILE NUMBBR: 2004-0187

PROJECT NAME: Bayport Terminal Complex Phase lA Wharf and Dredging Contract

CHANGE ORDER NO: 4

The attached Change Order has been signed by the Contractor and returned to us for Port Authority Execution. Please. follow the routing order as outlined below by inserting the date on the line containing your name or initials and passing on to the person listed in the "TO· column.

i3~JLj. Contra-:tr, Spec~.alJ.st

- = -- = .. .. -- === =.:.: =- =- - := - :::. ..• = .- --

ROUTING . -.. ' - - " - ' - _._ .... _--------- ..._- ---=--=nePE DATE ..:....~ ... FROM --=-==-

Name Dept.

-,-_~:::£_~ TO . _·-_-Name - _... -.. -

_,?!! JJof' _ Eng. Bobby King Eng. Engi~ee~_.--f!l!.

qll~Of Eng. Bngineer -JctV\. Eng. secretary - n-

.~yio~ _._~9~~~_~=- s~c~~tary ~~'fJ -- 8n9.--.-·· ,_.~._ ~~.';;~~~~.'. "--14",:"<. ~~~:_ . _.. S. H. DeWolf Eng. ._se.c_::~~ary..f:( .~~~:-e>.s-_ Eng . _ . secretary - ~1 : Eng~. . _ Bobby Kt~g .' .

~y/l}r Eng. Bobby King Eng. J. B. Jackson

~~/~i.:-.~_.~r:-;-' J. B. JackBo_n _ _~ Eng. Bobby King

(IF OVER $10,000, MUST GO TO EXECUTIVE}

1/10/05 2ng.

9/7/95. Exec. Eng. Bobby King

1,/J7jO[ Eng . Bobby King Auditor Dick Rhoads

.*1)Jr Audil:or Dick Rhoads Eng. Bobby King

'1/J7J(]) Eng. S. H. DeWolf C:mtractor

e

005.010.019068

PHA0012046

INTER-OFFICE MEMORANDUM

Date: September14.2005 File: 2004-0187

To: Mr. H. T. Kornegay

From: James B. Jackson

Subject: Recommendation for Approval of Change Order No. 4 in the Estimated Amount of $12,962,800 to Zachry Construction Corporation for Bayport Terminal Complex Phase 1A Wharf and Dredging .

By Minute 2004-0524-13, the Port Commission awarded a contract in the estimated amount of $62,485,733 to Zachry Construction Corporation (ZCC) for Bayport Terminal Complex Phase 1A Wharf and Dredging.

The initial contract provides for a 1,660-foot wharf. Projected increases in demand for containerized cargo will require two 1·,OOO-foot berths at terminal opening. Extending the wharf 332 feet under the current contract is feasible and will assure the required berths are available. Construction of the extension can only be conducted within the schedule by the present Wharf and Dredging contractor because of construction structures currently in place which cannot be removed or relocated without adversely affecting ongoing wharf construction. Additionally, the current contractor's unique method of construction is the only practicable means of achieving strict emissions requirements for this contract. The contractor has submitted a proposal in the estimated amount of $12,962,800 forthe 332-foot wharf extension. The Engineering Department and the Phase 1A Program Manager have reviewed the contractor's proposal and found it to be fair and reasonable.

By Minute 2005-0725-18, the Port Commission authorized the issuance of a change order in the estimated amount of $12,962,800 to Zachry Construction Corporation for the above described changes. Accordingly, please sign the attached change order and return it to the Engineering Department for further handling.

JBJ/SHD/MV: ~

Attachment

C: Mr. Andrew Thless, P.E. - CH2M HILL, Inc.

Mr. Forbes Baker Mr. James Turner Mr. Mark Vincent, P.E. Mr. Jim McQueen, P.E.

005.010.019069

PHA0012047

0012.0003

SCOPE, TIME,AND PRICE MODIFICATIONS TO SPECIFICATIONS AND PROPOSAL Bayport Phase 1A Wharf and Dredging Contract

PORT OF HOUSTON AUTHORITY P. O. Box 2562 Houston, Texas 77252-2562

Pursuant to Texas Education Code § 44.039 (t), options for a scope or time modification and any price change associated with the modification were discussed by the PHA and Contractor. As a result of negotiation, the following scope. time. and price modifications were made to Proposer's Specifications and Proposal dated April 13, 2005, as amended by Proposals for 330 feet Wharf Extension and as further amended by Proposer's Supplemental Proposal dated July 11, 2005 except Ditch K construction will not be part of this agreemenl

1. Contractor shall construct 332 linear feet of Wharf utilizing the same construction methods outlined in the original 1,660 linear feet of wharf, for a total price of $12,962,800.

2. The Proposal price includes incorporation of change orders. RFl's to the original 1,660 linear feet of wharf incorporated through July 25, 2005.

3. PHA will furnish pile depths not later than August 12,2005. PHA shall furnish remaining wharf design documents by November 25, 2005.

4. Change order includes construction of an additional 332 linear feet of chain link fencing with three-strand anti-climb bars installed and, a drainage swell at the East end of the wharf extension to connect 10 the existing drainage, for an inclusive cost not to exceed $15.500.

5. The basis of drilled shaft construction is 21,266.5 linear feet of drilled shafts at a unit cost of $82/LF for a total cost not to exceed $1,743,853, included in the change order price. Adjustments to shaft length will be made at a rate-of $82 per linear foot of increased shaft length or cost reduction of $43 per linear foot of shaft length reduction.

6. The 332-feel Wharf Exlension Construction and all other components of the contract shall be completed by July 15. 2006. The interim completion date to accommodate the ship-to-shore crane arrival, as per the original contract is revised to February 15, 2006. and the length of wharf available at that time is changed to 850 linear feet, along with associated dredging to receive the crane transport vessel. The February 15, 2005 milestone completion date requires that the permanent power components as described in the contract documents be provided for the Ship to Shore Cranes. The original 1660 linear feet of wharf main deck and drilled piers shall be completed by June 1,2006.

7. The contractor's proposal originally assumed only 80,000 cubic yards of dredge malerial. The dredge quantity was revised from 80,000 to 110,000 cubic yards based upon actual survey. The Contractor will dredge and place 110,000 cubic yards of material in designated disposal areas at a rate of $13.15/cubic yard. for an increase of $1,446.500 inclusive in the change order price. Any quantity dredged short of the base quantity of 110,000 cubic yards, the remaining balance of the yardage to equal 110,000 cubic yards shall be paid to ZCC at a rate of $ 0.54 per cubic yard. this equals a credit to POHA at a rate of $12.61 per cubic yard on Ihe under dredge quantity. Any quantity dredged in excess of 110,000 cubic yards will be paid at the unit rate of $13.15/ cy_

8. The contractor will pay for all Construction Management Services to support the contractors work on the wharf extension change outside the work days as defined in General Condition 5.03.

9. The Contractor shall construct the 332-feel wharf extension using similar methods employed in the original contract with the effect of minimizing General Conformity emissions. Contractor shall be constrained to the General Conformity emissions, as documented by the PHA Emissions Calculator, as follows:

Quarterly Summary Emissions (tons)

Scope, TIme, and Price Modifications to Specifications and Proposal (August 1, 2002)

005.010.019070

PHA0012048

0012.0004

Q1 Q2 Q3 Q4 Q5 Q6 Q1 Q8 Q9 0.00 2.25 3.27 4.88 2.17 3.03 2.73 2.73 1.71 _edging hart Construction 0.03 0.13 0.19 0.49 0.63 0.63 0.63 0.63 0.44 Backlands 0.00 0.09 1.15 0.00 0.00 0.00 0.00 0.00 0.00 Total 0.03 2.41 4.61 5.31 2.BO 3.66 3.36 3.36 2.15

Rolling 4 otrs 0.03 2.50 7.11 12.46 15.25 16.44 15.19 13.18 12.53

Annual Summary (tons per year)

Project Year Dredging Wharf Backlands Total

Year 1 10.40 0.84 1.24 12.48 Year 2 10.66 2.52 0.00 13.18 Year 3 1.71 0.44 0.00 2.15 Year 4 0.00 0.00 0.00 0.00 Year 5 0.00 0.00 0.00 0.00 Year 6 0.00 0.00 0.00 0.00 Year 7 0.00 0.00 0.00 0.00 Year 8 0.00 0.00 0.00 0.00

10. The all contract provisions and instructions remain in effect except as changed herein.

Vice president Typed Title of Signator

08/29/05 Date

If Proposer is a Corporation:

Jaclyn M. Golson. Assistant Secretary Typed Name of Corporate Secretary

Scope, Time, and Price Modifications to Specifications and Proposal (August 1, 2002)

005.010.019071

PHA0012049

0012.0005

If Proposer is not a Corporation:

N/A Signature of Witness

N/A Typed Name of Witness

APPROVED AS TO FORM:

PortAuthorityCounsel

Scope. Time. and Price Modifications to Specifications and Proposal (August 1. 2002)

005.010.019072

PHA0012050

0012.0006

TAB 31

Mageau Report on Effect of Freezing and Thawing of Cutoff Wall on Drilled Shafts dated September 28, 2005 (PX14)

~ ..

'

MEMORANDUM ··.-:

.. .·. PlAV-600Eili!LDING, tiOOSTcWNIT S'lllan', SUITE'1420, SEA'Jli.E, WA 98101, H l.E'Pt<dNE: {206} 728-267q, FAX: (206)728-2732 www.geoengfneers.com

To: Larry Applegate- SoilFreeze Technologies Andy Tbiess- CH2M-H.ill FROM: Daniel Mageau, P.E. - GeoEngineers No. 2006-72970

DATE: September 28, 2005 ZCC EXHIBIT FILE: 6700-014-03 14 SUBJECT: Houston Baypott Phase IA Wharf FROZEN SOIL SHORING Effect of Freezing and Thawing of Cutoff Wall on Drilled Shafts

GEl Seattle: P:/6700014/03Mernos/CutoffWall - Freeze-Thaw-9-28-0S.doc

We ran a number of finite element analyses using 2-dlmensional and 3-dimensional PLAXIS computer runs to evaluate the potential impact of strength reduction in the soil around the drilled shafts after the ground thaws out. Using the design load {250 tons) and shaft embedment shown on DMJM Harris drawings and the unfrozen soil strength ·data presented in Geotest's report, we had the program calculate the shaft settlement and factor of safety (FS) for 4 cases: 1} no soU strength reduction (current condition), 2) 10% strength reduction, 3) 20% strength reauction and 4) 30"/0 strength reduction. Keep in mind that the shafts extend below the bottom of the freezing, so the lower portion wi II not be 1m pacted at all by freezing. To be conservat.i ve we assumed that the entire soil mass around the shaft between final slope grade and the 10Q-foot depth was frozen and then thaw~, not just up to 1 foot away as shown In our submittal.

The results are as follows:

CASE FS Settlement at Design Load 1. No reduction in soil strength 3.2 0.14D 2. 10% reduction in soil strength 3.1 0.15" 3. 20% reduction in soil strength 2.9 0.16" 4. 30% reduction in soil strength 2.5 0.17"

I also calculated the average unfrozen and thawed strength of the clay soil from the Houston Bayport project from the data presented in our 2125/05 soils report. As it turns out the avera_ ge unfrozen compressive strength {no freezing) from a total of 3 tests is -7 ksf while the average thawed strength for the same samples is -9.ksf, which indicates an increase instead of a decrease in strength due to freezing and thawing. This probably isn't real and is likely due to the natural scatter in soil properties. I would expect that we would see some minor reduction in the average strength after thawing if we completed lots more of the same type of tests. A good article was written about affect of freeze-thaw on strength of son by Graham and Au in 1985. From many tests, they found that the strength reduction of silt (very similar to our clay) is about 3b<'lo after 5 freeze-thaw cycles. Unfortunately, they did not do a test after just one f~eeze-thaw cycle {like we will have at this project) which should show a higher strength than soil exposed to 5 freeze-thaw cycles. After talking with Dave Sego, other researchers have found similar results. We also have dense sand at depth. The effect of freeze-thaw on the strength of sand is typically less than on clay because of the fact that the sand generally does not develop much ice formation. Based on all this information, we may see no more than about a 10% to 15% reduction in overall strength for the Houston Bayport soil, in my opinion.

Assuming a conservative 15% strength reduction in the soil after thawing and considering the results from PLAXIS shown above, it appears that even if we freeze all the soil around the drilled shafts (not just up to 1 foot away) we will only see a minor reduction in the factor of safety (3.2 to 3.0) and virtually no increase in shaft settlement. From this information, it looks to me as if we really don't need to worry too much about freezing the soil around the shafts.

.... ··:..

DISCL'.IMER: Any electronic form, facsimile Of hard copy of the original document (J--------.,).if provided, and any attachments we only a copy of the llfiginal document The original document is ~ an:! wm serve as the official document or rElC()fd. ~

EXHIBIT NO• .fll II ~o' -6 7 .:r I-f P- FIP.015421

0014.0001

...........· ..... .. . ':. '; ,._,# "'·'· • • • • • • •

Memorfll)dum to Larry Applegate(SoilFreeze) and Charles Rogers (Zachry) September 9, 2005 Page2 ·.: ·:· -~;

. ..·

•• - 4.,

•·.··. ... ..

P- FIP.01 fi4?2

0014.0002

TAB 32

McQueen email to Ely dated October 10, 2005 (PX1)

From: James McQueen Sent: Monday, October 10,2005 03:35PM To: Ely, Jeff/HOU CC: Johnson, Robert/HOU; Thiess, Andrew/HOU Subject: RE: Proposal

The cut off wall was rejected. We are hoping ZCC comes up w/an alternate method. The fact is everyone knew that ZCC was proposing a freeze cut off wall that included one pile. True we did not know about the possibility of freezing more than one pile. That hard cold fact is we might have a liability in a change? I do not expect an approval or rejection from Geotest since ~he PHA has no one wlthis experience. I would hope for a review that says designer of freeze wall assumptions appear to be reasonable. Then I would have something to take to Steve. Mark is insisting in DMJM involvement which I do not understand what I can expect from DMJM. You know DMJM more than I do. What can I expect?

From: Jeff.Eiy@CH2M.com [mailto:Jeff.Eiy@CH2M.com] Sent: Monday, October 10, 2005 4:16PM To: James McQueen . Cc:: Robert.Johnson@CH2M.com Subject: RE: Proposal

Jim:

Regardless of Geotesfs proposal, which seems reasonable to me, I'm still concerned that in the end we will get a "maybe" response with a list of qualifications rather than an "approved" or "rejected" response. To me ( it seems prudent to start preparing for the possibility that the cut off wall proposal may not be approved.

\ Perhaps we should raise this in our weekly meeting with ZCC tomorrow?

Jeff

From: James McQueen [mailto:jmcqueen@poha.com] Sent: Monday, October 10, 2005 3:58PM To: Ely, Jeff/HOU Subject RE: Proposal

I agree. 2% is reasonabie. Thanks

From: Jeff.Eiy@CH2M.com [mailto:Jeff.Eiy@CH2M.com] Sent: Monday, October 10, 2005 3:11 PM No. 2006-72970 To: James McQueen Cc: Robert.Johnson@CH2M.com; Mark Vincent ZCC EXHIBIT Subject: RE: Proposal 1· Jim:

Attached are Geotest's rates from their 1999. contract. The 2001 proposal for load testing did not include a rate schedule. Geotesfs current proposal is also attached for your convenience . Please note the following

\[~ EXHIBIT No.!ll Jo-tq -o '? ;:J1f CH2MHILL031065

0001.0001

rates:

Classification 2005 Rate 1999 Rate

Principal 143 120 Project Manager 120 100 Support Staff 25 35

Composite rate based on hours submitted:

2005: $113.00/hr 1999: $101.67/hr

Based on a six year elapsed period, this boils down to a yearly escalation rate of less than 2%, which seems reasonable.

Jeff

From: James McQueen [mailto:jmcqueen@poha.com] Sent: Monday, October 10, 2005 9:48 AM To: vgryder@geotesteng.com; Ely, Jeff/HOU Cc: Johnson, Robert/HOU; Mark Vincent Subject: RE: Proposal

The proposal appears fair and reasonable. Jeff please confirm that the hourly rates are as agreed and lets get going. Jeff please keep OMJM in the loop as Mark wants to make sure they are informed. Thanks

From: Vicki Gryder [mailto:vgryder@geotesteng.com} Sent: Friday, October 07, 2005 8:33 AM To: James McQueen Subject: Proposal

Jim.

Per the voice mail I left you, I am attaching the proposal from Dr. Vijay. Please feel free to call him with any questions.

Thanks.

Vicld Gryder Executive Assistant Geotest Engineering, Inc. 5600 Bintliff Drive Houston. Texas Tel: (713) 266-0588 Fax: (7 13} 266-2977 e-mail: vgryder@geotesteng.com

CH2MHILL031066

0001.0002

No virus found in this outgoing message. Ch~cked by AVG Anti-Virus. Versi011: 7:0.344 I Virus Database: 267.11.10/119- Release Date: 10/4/2005

.··

CH2MHILL031067

0001.0003

Sydney Ballesteros

From : Sydney Ballesteros Sent: Wednesday, December 09, 2009 7:48AM To : 'Lawrence Fossi' Cc: Sims, Bill; White, Karen; zzz_Brandon Allen Subject: RE: One more

Thanks Larry.

Abiassi intends to testify that the Aug. 2006 breach in sections 4-6 was not planned; I'm not sure what you are comparing the exc. types demonstrative to, but this is intended to be a general conceptual representation of those areas and Mr. Abiassi can testify as to the general area of B1 as he is familiar with it from personal experience; yes, the Kiewit photos are intended as part of background on Abiassi's work experience-- we are not claiming that these are like the bayport project (although obviously there may be components of the work on these projects such as excavation, berms, sheet pile walls etc. that were part of these jobs that Abiassi has experience with).

As to the animations - these are based on the Draper model as I understand it. As Draper has not yet testified, we will not offer these demonstratives with Abiassi.

-----Original Message----- From: Lawrence Fossi [ ma ilto:lfossi@fossijewell.com) Sent: Wednesday, December 09, 2009 5:27AM To: Sydney Ballesteros Cc: Scott D. Morgan; Sims, Bill; White, Karen Subject: RE: One more

Answers:

Crick 1 --OK Crick 2 -- OK Crick 3 --OK Mow-- OK Mow-2 --OK Mow-3 --OK Hydro-- OK Hydro-2 -- OK Hydro-3 -- OK jet-- OK jet-2 -- OK Rev-- OK Rev2 -- OK I~ PLAINTIFF'S EXHIBIT

Flood-- OK '

Flood 2 -- Not OK, but will be if you make clear that the flood happened accidentally, overnight Extypes -- Bl shape is odd & does not resemble other drawings. probably OK but tell us where it's coming from Underdeck (photo) -- OK Cricket (photo) -- OK Ab --OK* Ab-2 --OK* Ab-3 --OK* Ab-4 --OK* [*We assume these are to build up Mr. Abiassi with some prior Kiewit projects. If there is to be a claim that these projects are like Bayport, let us know about that as it may pose an issue.]

We have problems with the two movies (excavation and revetment} they lack any predicate. What schedules or testimony will support these before they are played?

From: Sydney Ballesteros [mailto:sballesteros@gibbsbruns.com] Sent: Tuesday, December 08, 2009 7:55AM To: Lawrence Fossi Cc: Scott D. Morgan Subject: RE: One more

I'm having Scott bring the two new exhibits I sent you to the courthouse so you can look at them. I'm also having him provide you copies of our demonstratives for Abiassi in hard copy form with the two graphics on a flash drive.

-----Orig ina I Message----- From : Lawrence Fossi [mailto:lfossi@fossijewell.com] Sent: Tuesday, December 08, 2009 7:51AM To: Sydney Ballesteros Subject: Re: One more

Oddly, I didn't get the email (or more likely managed to delete it). Let me have scott run it for me this a.m. thnx

Sent via BlackBerry from T-Mobile

From: Sydney Ballesteros <sballesteros@gibbsbruns.com> Date: Tue, 8 Dec 2009 07:38:23 -0600 To: Lawrence Fossi<lfossi@fossijewell.com>; Scott D. Morgan<smorgan@gibbsbmns.com>; Mike Absmeier<mabsmeier@gibbsbruns.com>; Sims,Bill<bsims@velaw.com>; Gray, Holly<hgray@velaw .com> Cc: Robin C. Gibbs<rgibbs@gibbsbruns.com>; zzz_Brandon Allen<ballen@reynoldsfrizzell.com>; mgreer@trialgraphix.com<mgreer@trialgraphix.com>

Subject: RE: One more

Larry,

There are two animations in Abiassi's demonstratives that I emailed you . We will provide you those on a disc this morning.

-----Original Message----- From: Lawrence Fossi [mailto:lfossi@fossijewell.com] Sent: Tuesday, December 08, 2009 7:21AM To: Scott D. Morgan; Mike Absmeier; Sims, Bill; Gray, Holly Cc: Robin C. Gibbs; zzz_Brandon Allen; Sydney Ballesteros; mgreer@trialgraphix.com Subject: RE: One more

Scott, I'm in overwhelm with all the new stuff. print hard copies if you would & bring to court & we'll let you know.

are there movies in the Abiassi stuff, or just hard prints?

also, need a response on DX 590-594

From: Scott D. Morgan [mailto:smorgan@gibbsbruns.com] Sent: Tuesday, December 08, 2009 7:12AM To: Mike Absmeier; Sims, Bill; Lawrence Fossi; Gray, Holly Cc: Robin C. Gibbs; zzz_Brandon Allen; Sydney Ballesteros; mgreer@trialgraphix.com Subject: RE: One more

-----Original Message----- From: Mike Absmeier Sent: Monday, December 07, 2009 5:44 PM To: Sims, Bill; 'Lawrence Fossi' Cc: Robin C. Gibbs; zzz_Brandon Allen; Sydney Ballesteros; Scott D. Morgan Subject: One more

Bill/Larry,

We would also propose adding Depo Ex. 115 as a new trial exhibit (I don't believe it's currently in evidence). This would be PX 937. Any objection?

Thanks,

Mike

TAB 33

The Port's October 11, 2005 Response to Zachry's September 9, 2005 Frozen Cutoff Wall Design (PX266)

Submittal Item Project [C70-1A-D01] -Bayport View Date 4/28/2006 Ph. lA- Wharf and Dredging Wharf and C70-1A-D01 Dredging

Nathelyne A. Kennedy & Assoc. 6100 Hillcroft Suite 710 Submittal Houston, TX 77081 Item No. 00700-015 Phone: (713) 988-0145

General Information

Item No. 00700-015 Revision 0 Package No. 00700.0 Rev. Description Cutoff Wall Design CSI Code 00700 - General Conditions Submitting Company Zachry Construction Corporation Reference No. Copies Required Status Returned Item Type Responsible David Griffin (Zachry Construction Corporation) 'Team Member · Item Notes During the proposal for the 332ft wharf extension, the cutoff wall concept was presented as affecting one "B" row pile that would have to be encased in steel to prevent movement of the pile. ZCC's submittal for the cutoff wall, however, indicates freezing of soil as close as one foot from as many as 14 piles, which is inside the zone of soil that has structural impact on the friction resistance of the piles. However, preliminary Indications are that the design may have an indeterminate affect on a significant number of nearby shafts which may present unacceptable risk to the Port of Houston. Contractor must present alternative cutoff wall design, such as a cellular sheet pile wall or grout wall, that provides the desired cutoff effect with.less risk to the structural integrity of the wharf. Or the contractor may present the Port of Houston with an altemate means of mitigating risk to the structural integrity of the wharf.

Primary Revise and Resubmit Response Submission Notes

Dates

Material Required Lead Time (days} Required on Site Approved Required Review Time (days) 20 Submittal Required By Submission Due

Linked Documents

Document Type Document Description Date Doc C70-1A-D01-01636 9/12/2005

No. 2006-72970 ZCC EXHIBIT ZCC-EXP-0000073 266 0266.0001

Distribution

Recipient Company Method Date Charles Rogers Zachry Construction Corporation Email: rogersc@zachry.com 10/11/2005 David Griffin Zachry Construction Corporation Email : griffindg@zachry.com 10/11/2005 David Griffin Zachry Construction Corporation Message 10/11/2005 Jeff Ely CH2M HILL Email: jelyl@ch2m.com 9/14/2005 Jeff Ely CH2M HI LL Message 9/14/2005 Rich Kl assen Zachry Construction Corporation Message 10/11/2005 Rich Klassen Zachry Construction Corporation Email: andersonhe@zachry.com 10/11/2005

ZCC-EXP-0000074

0266.0002

TAB 34

Transcript of October 11, 2005 Weekly Construction Coordination Meeting (PX314)

314

1 IN THE JUDICIAL DISTRICT COURT OF HARRIS COUNTY, TEXAS 2 3 ZACHRY CONSTRUCTION )

CORPORATION, )

4 )

Plaintiff, )

5 )

V. )

6 )

PORT OF HOUSTON ) CAUSE NO.

7 AUTHORITY, ) 2006-72970 )

8 Defendant. )

)

9 )

)

10 ) 11 12 13 14 Weekly Construction Coordination Meeting 15 Date: October 11, 2005 16 Minutes: 08:40- 13:29 17 18 19 20 21 22 23 24 25

No. 2006-72970 ZCC EXHIBIT

1 Audio Reporting Transcribed by:

2

3 JENNIFER HAYNIE ALPHA REPORTING CORPORATION 4 236 Adams Avenue Memphis, Tennessee 38103 5 901.523.8974

6

7

Proper names and inaudibles or undiscernible 8 testimony was provided Andy Anderson.

9

10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

.;: ~·

·:,'..

1 Date: October 11, 2005 2 Minutes: 8:40 - 13:29 3 (Requested portion of Weekly Construction 4 Coordination Meeting.) 5 ANDY THIESS: Then the pile :· 6 redesign for the cut off wall. Here we go. You 7 got it. Gave you a response. You have it in 8 yourhand. 9 ANDY ANDERSON: Yeah. Now, the 10 answer to this it says that the contractor -- 11 first of aU, this says "no, resubmit. 11 All 12 right. There's a number of avenues to go here. 13 Number one, they ask for an alternative cutoff 14 such as a ceUular sheet pile wall. There is a 15 cellular sheet pile wall between the freeze pipe 16 and the piles. That's the cut off wall. That's 17 the structure. 18 ANDY THIESS: I understand. 19 ANDY ANDERSON: I don't think they 20 understand. 21 ANDYTHIESS: No. Theyunderstand. 22 ANDY ANDERSON: Well, then what are they 23 talking about? The freeze pipes are contained 24 within the sheet pile wall. 25 ANDY THIESS: They're talking about

4

1 a cellular meaning like a honeycomb structure. 2 Some sort of structural sheet pile wall. 3 ANDY ANDERSON: Okay. Now, we get 4 it. 5 JOHN GLASGOW: Then we don't have to 6 freeze it. 7 ANDYTHIESS: Correct. 8 JIM MCQUEEN: Yeah. Yeah. That's 9 the concem. 10 ANDY THIESS: Or slurry or soil 11 cement or any other -- any other method of 12 putting in this wall that is not such a high 13 risk to the structure. 14 JOHN GLASGOW: DanMageau was 15 supposed to be here today, right? 16 CHARLES RODGERS: Tomorrow. 17 JOHN GLASGOW Tomorrow. And Corey 18 was going to bring that up with him and see if it 19 willfly. 20 ANDY ANDERSON: We will look at it, but two things. 21 Number one, if we want to accept the 22 risk. It's not -- it's not a submittal. It 23 is for information purposes only, okay, and 24 number two, our price is predicated on current 25 construction methods and that was clearly

5

1 defined. Now, chances are based on the price 2 of this goddamn cut off wall you know, we can design 3 something and stay within the parameters of what 4 we got. 5 ANDY THIESS: That's all the Port's 6 asking for. 7 ANDY ANDERSON: And we will look at that, 8 and we need to look at it very, very quickly. 9 ANDY THIESS: But I think ify'all 10 design something alternate, if it can be done, 11 it will be real easy-- 12 JIM MCQUEEN: I want you to 13 understand the spirit of this whole thing is 14 that we -- the problem is that it jeopardizes 15 some footings on either side, piers on 16 either side. 17 There's a possibility of that, okay, 18 and there's a tisk. We know that you guys are 19 taking that, but we're not-- we're not 20 necessarily sure that we want you to take that. . 21 There's a lot of concern and we're not rejecting 22 it all together as we're not going to do it. 23 We're still throwing money at evaluation, but we 24 would like to know if there's another 25 alternative.

1 ANDY ANDERSON: We'll look at it. I 2 half way looked at a bin wall early on in this, 3 but to be quite honest with you, I looked at a 4 bin wall for replacement of the freeze wall 5 itself Not the cut off wall. The problem was 6 in the freeze wall was that the soil has no 7 abiJity to handle the stress of the bin wall. 8 It would just collapse. 9 Now, the cut off wall is something a little 10 something different, you know, and I need to 11 look at that. The problem I see with that is we 12 still have to design it so that it runs between 13 the piles and does not encase the pile row because 14 I'm worried about the lateral movement of the 15 wall when pressure is relived on one side and I 16 don't want to side load these piles. 17 At any rate, a semicircular cell 18 possibly could work. Now I have to, you fucking ruined my 19 whole a:ftemoon, now I'll have to sit down and .. . 20 .TIM MCQUEEN: Because we heard you 21 were out playing golf. 22 ANDY ANDERSON: That's tomon·ow. But 23 we'll look at it and see what we can do on it, 24 but I want to caution-- the designers need to 25 understand that this is not a submittal that

7

1 requires approval, and we are worlcing with you and 2 we'll come up with something else. 3 JIM MCQUEEN: We understand, or at 4 least I understand, and the latter part too, the 5 cost issue. 6 ANDY ANDERSON: I do not want to 7 have to have to readdress that issue. 8 JIM MCQUEEN: rm not-- no one 9 in our... but we just want you to look. 10 ANDY ANDERSON: I will look at it 11 very hard. Luckily Mageau is going to be here 12 tomorrow so we may actually be able get 13 something resolved quickly. He's going to be 14 here. 15 ANDY THIESS: All right. 16 (End of requested portion ofWeekly Construction 17 Coordination meeting.) 18 19 20 ,. 21

TAB 35

Thiess email to Ely dated November 13, 2005 (PX2)

From: Thiess, Andrew/HOU Sent: Sunday, November 13, 2005 06:14 PM To: Ely, JefflHOU Subject: RE: cutoff_walUesponse.doc

Jeff,

For business risk purposes you might state that during negotiations for the 332 ft extension, we anticipated it being designed according to the criteria 01the original freeze wall. Based on designer input prior to design of the original freeze wall, it was expected that the cutoff wall would be designed in a way to avoid compromising any piers by freezing, except for one pier in Row B that was identified by ZCC beforehand. The original freeze wall design accomodated a 6 feet setback from the nearest piers as requested by the designers. Potential freezing of piers resulting in loss of load capacity is the basis for PHA concerns regarding the cutoff wall design. These concerns have not been adequately addressed in the cutoff wall submittal.

I think it would be a good idea to include this in your memo. Zachry has implied that they believe our review and rejection of the cutoff wall design is a breach of their change order contract, as they told us there would be a cutoff wall. They believe this gives them a claim for time. We need to make the point that we anticipated it being designed according to the criteria of the original freezed wall. Otherwise we will have to state this separately in another letter.

From: Ely, Jeff/HOU Sent: Friday, November 11,20052:49 PM To: James McQueen; Mark Vincent; Farhat, Jerry; Thiess, AndrewjHOU; Johnson, Robert/HOU ee: Emsley, Laurence/HOU Subject: cutofCwalLresponse.doc

All: Please provide any comments by COB Monday, November 14. I will send this out first thing Tuesday.

Jeff

No. 2006·72970 ZCC EXHIBIT

2

1kn~ EXHIBIT NO.ll1 lo-R . . o7;:J1f

CH2MHILL029619

0002.0001

TAB 36

Email string between McQueen, Thiess, Ely, and others dated March 21, 22, and 28, 2007 (PX504)

- -·-··--- - - -- -·------ - - - - ---- - - - - -- - - From: James McQueen Sent: Wednesday, March 28, 2007 07:26 AM To: Andy Thiess: Ely, Jeff/HOU CC: Gene Norman Subject: RE: Phase 1A Dbl Wal

I discussed w/Jeff and he daid settlement of 1" was nothing to be alarmed about. I just believe it is in PHA best interest to monitor.

Jim McQueen. P.E. Project Manager Port of Houston Authority (713) 670-2837 FAX (713) 670-2837 i!Jl.£qU~e.D.@P..QQ_9.CQ.IJl First in Foreign Tonnage

CONFJDENTI AL COMMUN ICATION

This message and attached materials are for the use of the addressee above and may contain confidential information. Please do not disseminate, distribute, or copy this message unless you are the addressee. If you receive this message in error. please immediately notify the sender by replying to this message by phone at (7 I 3) 670-2837. Thank you.

from: Andy Thiess Sent: Wednesday, March 28, 2007 8:24AM To: Jeff.Eiy@ch2m.com: James McQueen Cc: Gene Norman Subject: RE: Phase lA Obi Wal

My understanding from o3rlier "affect of freeze wall discussions" was the entire wharf was anticipated to sink a bit as it initially settled.

ro L..:.JA ndrew W. Thiess, PE, PMP Port of Houston Authority !:Lttg://.YVY.ffl..POrt_ol.hcu?to.n.co..m 832-250-2899 cell 713-670-2442 ore ?13-670-2448 fax athiess@poha.com The Port Defirers !he: Goods CONFIDENTIAL COMMUN!CA TION This message and attached materials are for the use of the addressee above and may contain conf•dential mformation. Please do not disseminate. distribute. or copy this message unless you are the addressee. If you rt:ceived this message- in error. please immediately notify the sender by replying to this message or by telephone at {713) 670·2442. Thank you.

From: Jeff.Eiy@ch2m.com [mailto:Jeff.Eiy@ch2m.com) Sent: Thursday, March 22, 2007 2:26 PM To: James McQueen No. 2006-72970 Cc: Gene Norman; Andy Thiess ZCC EXHIBIT 504 CH2M HILL030890

..

0504.0001

Subject: RE: Phase lA Dbl Wal

Jim:

Can someone give me a little more detail: I'm not quite sure where these pictures are taken. However, the doublewal settling 1" or so doesn't seem like a problem to me.

jeff

From: James McQueen [mailto:jmcqueen@poha.com] Sent: Wednesday, March 21, 2007 4:57 PM To: Gene Norman; Andy Thiess; Ely, Jeff/HOU Subject: FW: Phase lA Dbl Wal

Gene can you mark measuring locations on the pavement and lets watch for a while. Andy I believe we need to notify ZCC but we would not want them doing anything yet until we know a little more? Jeff you have any other thoughts?

Jim McQueen. P.E. Project Manager Port of Houston Authority (713) 670-2837 FAX (713) 670-2837 jmcqueen@poha.com First in Foreign Tonnage

CONFIDENTIAL COMMUN1C AT10N

This message and attached mate1ials are for the use of the addressee above and may contain confidential information. Please do not disseminate. distribute. or copy this message unless you are the addressee lfyou receive this message in error. please im1nediately notify the sender by replying to this message by phone at (7 13) 6 70-283 7. Thank you.

-----·-·------·--··-·····- - · - - -

From: Gene Norman Sent: Wednesday, March 21, 2007 1:46 PM To: James McQueen Subject: Phase lA Dbl Wal

Jim, Please see attached photos. Pictures were taken between H-line fl. Dbl Wal foundation slabs. It appears to have settled in some areas as much as 1".

CH2MH1LL030891

0504.0002

TAB 37

Management Services Agreement (PX643)

MANAGEMENT SERVICES AGREEMENT This Management Services Agreement ("Agreement") is entered into effective as of January 1, 2008 (the "Effective Date") by and between ZACHRY INDUSTRIAL, INC. , a Delaware corporation, formerly known as Zachry Construction Corporation ("Zachry"), and ZACHRY CONSTRUCTION CORPORATION, a Delaware corporation ("Manager"). Zachry and Manager may be referred to in this Agreement collectively as the "Parties" and individually as a "Party."

RECITALS

A. Prior to the Effective Date, Zachry had entered into the construction agreements and associated documentation for certain heavy construction and building construction projects, as described on Exhibit "A" attached hereto (the "Construction Contracts" or individually a "Construction Contract").

B. On the Effective Date various personnel, equipment and other assets associated with Zachry's former heavy construction division and building construction division were transferred by Zachry to Manager as part of a corporate restructuring of Zachry along industry segment lines ("Corporate Restructuring").

C. The Construction Contracts were not and have not been assigned or transferred to Manager; and Zachry remains fully liable under the Construction Contracts in accordance with their terms.

D. In conjunction with the Corporate Restructuring, Manager agreed to act as manager for Zachry with respect to the administration, management and performance of the Construction Contracts, each of which were associated with heavy construction and building construction industry segments that were transferred to Manager.

E. Manager is ·experienced in the business of construction management and administration, particularly with respect to the type of heavy construction contracts represented by the Construction Contracts.

F. Zachry and Manager desire to memorialize the terms upon which Manager agrees to provide certain management services with respect to performing Zachry's obligations and work under the Construction Contracts.

AGREEMENT

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Zachry and Manager agree as follows:

No. 2006-72970 ZCC EXHIBIT 643 MANAGEMENT SERVICES AGREEMENT PAGE I ZCC-40-137656

0643.0001

ARTICLE 1 DEFINITIONS AND INTERPRETATION

1.1 Certain Defined Terms. Capitalized terms used in this Agreement without other definition herein shall have the following meanings, unless the context requires otherwise:

"Governmental Authority" means any national, federal, state or local government, political subdivision, authority, agency, tribunal, court, judicial or other body, public or statutory instrumentality, officer or entity, including any environmental or zoning authority, building inspector, health or safety .inspector or fire marshal, any governmental regulatory body or commission, any arbitrator with authority to bind a party at law, or other regulatory bureau, authority, body or entity having legal jurisdiction over the matter or Person in question.

"L aw" means any federal, state, local, or other constitution, charter, act, statute, law, ordinance, code, rule, or regulation, or legislative or administrative action of any Governmental Authority; or a final decree, judgment or order of a court. ··

"Person" means any natural person, firm, corporation, company, limited liability company, joint stock company, general or limited partnership, trust, incorporated or unincorporated association, joint venture, Governmental Authority or any other entity, whether acting in an individual, fiduciary or other capacity.

"Reimbursable Costs" means all costs incurred by the Manager for the proper performance of the Services, including, without limitation, the verifiable actual costs of the following, to the extent allocable to the Services: ·

(a) wages, salaries and overheads for site personnel;

(b) all out of pocket expenses paid or payable to third parties;

(c) builders risk insurance costs and bond premiums; and

(d) field office expenses.

Wages, salaries and overheads for Manager's non-site persormel, legal costs, and other home office overhead are not Reimbursable Costs, except to the extent, and only to the extent directly relating to the Construction Contracts from and after the Effective Date and as approved by Zachry in its sole discretion.

1.2 Rules of Interpretation. The following rules of interpretation shall apply to this Agreement: (i)the terms "herein," "herewith" and "hereof' are references to this Agreement, taken as a whole; (ii) the term "includes" or "including" shall mean "including, without limitation·"

' (iii) references to a "Section " "subsection" "clause" "Article " "Exhibit"

) ) ) ) '

"Appendix" or "Schedule" mean a Section, subsection, clause, Article, Exhibit, Appendix or Schedule of this Agreement, as the case may be, unless in any such case the context requires otherwise; (iv) references to a given agreement, instrument or other document shall be a reference to that agreement, instrument or other document as modified, amended, supplemented

MANAGEMENT SERVICES AGREEMENT PAGE2

ZCC-40-1 37657

0643.0002

and restated through the date as of which such reference is made; (v) references to a Law includes all amendments or modifications thereto, all rules and regulations promulgated under such Law and all administrative and judicial authority exercisable thereunder; (vi) reference to a Person include its successors and permitted assigns; and (vii) the singular shall include the plural and the masculine shall include the feminine, and vice versa.

ARTICLE2 MANAGER SERVICES

2.1 Engagement and Services. Subject to the provisions hereof, Zachry hereby engages and contracts Manager to manage, supervise, administer, direct, control, and perform or cause to be performed on behalf of Zachry all of Zachry's obligations under the Construction Contracts, including the performance of work thereunder, the administration and management of all litigation, and the management and administration of claims, obligations of indemnity, and other matters arising out of the Co~struction Contracts, and to perform certain other tasks, duties or services as the Parties may from time to time agree (the "Services"). Manager hereby accepts such engagement and agrees to perform the Services in accordance with the terms and conditions of this Agreement.

2.2 Power of Attorney. The Parties acknowledge that in order to perform the Services, Manager will necessarily need to act for and on behalf of Zachry on various matters in connection with the Construction Contracts. Zachry hereby constitutes and appoints the Manager with full power of substitution as its true and lawful representative and attorney-in-fact, with full power and authority in its name, place and stead, (i) to execute, swear to, acknowledge, deliver, file and record in the appropriate public offices all releases, waivers of lien, or certificates required under such Construction Contracts; (ii) to prepare and deliver certificates or instruments required under the Construction Contracts, prepare and deliver bills to third parties, accept payments, execute amendments and change orders, give warranties and perform all other contractual obligations of Zachry in connection with such Construction Contracts; (iii) to assert any claims, or to file actions, motions, pleadings, responses to discovery, and other instruments in connection with any claims related to such Construction Contracts, and (iv) to perform any other acts that Manager deems appropriate or necessary to perform the Services. Zachry agrees and acknowledges that the acts and decisions of Manager within the scope and authority of this power of attorney and the terms of this Agreement shall bind Zachry.

2.3 Cooperation. Zachry shall fully cooperate with Manager in the performance of the Services or in exercising its power of attorney granted in Section 2.3 above, including executing such documents or instruments as Manager may reasonably request from time to time in connection with the Services and the Construction Contracts. The right to abandon, settle, compromise, waive or dismiss any right or claim under the Construction Contracts shall be shared by Zachry and Manager.

2.4 No Partnership. This Agreement creates a contract relationship between Zachry and Manager. Nothing in this Agreement shall be deemed to constitute Manager as a partner or joint venturer of Zachry or Zachry's affiliates or vice versa.

MANAGEMENT SERVICES AGREEMENT PAGE3 ZCC-40-137658

0643.0003

2.5 No Assignment. Nothing in this Agreement shall be deemed to be an assignment of the Construction Contracts to Manager. Zachry is and shall remain the contractor under each of the Construction Contracts. As such, Zachry retains all rights, obligations and claims arising from or in connection with the Construction Contracts, any owner under the Construction Contracts, or any subcontractors on the projects covered by the Construction Contracts.

ARTICLE3 PAYMENTS & ACCOUNTING

3 .l Payments. Manager has and will continue to incur costs on behalf of Zachry to perform the Services. As consideration to Manager for the performance of the Services hereunder, and for all costs incurred by Manager in connection therewith, Zachry agrees to pay to Manager the Reimbursable Costs. Zachry will pay-over to Manager, or Manager shall have the right to directly receive, all payments from the owners under the Construction Contracts, recoveries for claims thereunder, or other payments arising from the Construction Contracts ("Contract Payments"). The timing and schedule for any amounts due hereunder shall be as mutually· agreed by the Parties from time to time in light of the particular Services and Construction Contract.

3.2 Pavment Limitation. Notwithstanding anything in Section 3.1 to the contrary, Zachry shall have no obligation to pay or reimburse Manager for any Reimbursable Costs in excess of the Contract Payments. Therefore, if the Contract Payments received by Manager are Jess than the Reimbursable Costs, Zachry will have no liability for any such shortfall. If the Contract Payments exceed the Reimbursable Costs, the parties shall confer and agree upon a mutually satisfactory allocation of any such excess amounts between the Parties consistent with the intents and purposes of the Corporate Restructuring.

3.3 Accounting. Manager shall keep and maintain, books, records, accounts and other documents sufficient to reflect accurately and completely all Reimbursable Costs incurred pursuant to this Agreement, as well as the Contract Payments received.

ARTICLE4 TERM & TERMINATION

4.1 Term. Unless earlier terminated pursuant to Section 4.2. or Section 4.3 hereof, the term of this Agreement shall commence on the Effective Date and continue for a period of five (5) years, and then month-to-month thereafter, unless terminated by either Party on not less than sixty (60) days notice.

4.2 Termination by Mutual Consent. The Parties may terminate this Agreement in its entirety, or solely with respect to the Services, at any time upon mutual written consent.

4.3 Termination bv Either Partv for Cause. Either Party (the "First Party") may by written notice to the other Party (the "Second Party") terminate this Agreement upon or after the occurrence of any of the following events:

(a) In the event of the bankruptcy of the Second Party; and

MANAGEMENT SERVICES AGREEMENT PAGE4 ZCC-40-137659

0643.0004

(b) In the event of a failure by the Second Party to perform its obligations under this Agreement in any material respect, if the Second Party does not cure such failure within fifteen (15) days of the date of a written notice from the First Party demanding such cure (or, if curable, within such longer period of time up to sixty (60) days as is reasonably necessary to accomplish such cure without material adverse effect on the First Party or the performance of the Services).

ARTICLES LIMITATION ON LIABILITY

5.1 Standard of Care. In providing the Services, Manager shall use the same degree of care, skill and prudence customarily exercised by it for its own provision of services to itself and its affiliates (and in compliance with applicable Law) to provide, or cause to be provided, the Services. Other than as expressly set forth in this Agreement, Manager does not make any other warranty, express or implied, with respect to the Services.

5.2 No Warranties or Guarantees. Except as expressly provided in this Agreement, none of the Parties makes any warranties or g-uarantees to any other Party, express or implied, with respect to the subject matter of this Agreement, and Manager hereby expressly disclaims any implied warranty or warranties imposed by Law, including the Implied Warranties of Merchantability and Fitness for a Particular Purpose.

5.3 No Consequential Damages. In no event, whether as a result of breach of contract, breach of warranty, tort liability (including negligence), strict liability, indemnity or otherwise, shall either Party or its agents be liable to the other Party for special, indirect, punitive, exemplary or consequential damages or fiduciary liability of any nature, and each Party hereby releases the other Party and its agents therefrom.

ARTICLE6 MISCELLANEOUS PROVISIONS

6.1 Joint Effort. Preparation of this Agreement ~as been a joint effort of the Parties and the resulting document shall not be construed more severely against one of the Parties than against the other.

6.2 Captions. The captions contained in this Agreement are for convenience and reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained herein.

6.3 Severabilitv. The invalidity of one or more phrases, sentences, clauses, Sections or Articles contained in this Agreement shall not affect the validity of the remaining portions of the Agreement so long as the material purposes of this Agreement can be determined and effectuated.

6.4 No Waiver. Any failure of either Party to enforce any of the provisions of this Agreement or to require compliance with any of its terms at any time during the pendency of this Agreement shall in no way affect the validity of this Agreement, or any part hereof, and shall not

MANAGEMENT SERVICES AGREEMENT PAGES

ZCC-40-137660

0643.0005

be deemed a waiver of the right of such Party thereafter to enforce any and each of such provisions.

6.5 F urther Assurances. Each Party agrees to execute and deliver all further instruments and documents, and take all further action not inconsistent with the provisions of this Agreement that may be reasonably necessary to perform the Services and to effectuate the purposes and intent of this Agreement. In order to fully realize the benefits of the Contract Payments, Zachry will assign to Manager accounts receivables under the Construction Contracts.

6.6 No Third Party Benefi ciary. This Agreement is not intended to, and does not, confer upon any Person other than the Parties any rights or remedies hereunder other than the Parties' respective affiliates. Without limiting the generality of the foregoing, nothing in this Agreement shall be construed to create any duty to, standard of care with respect to, or any liability to any Person who is not a Party to this Agreement.

6. 7 : Go'Verning Law. This Agreement shall be governed by and construed under the laws of the State ofTexas, without reference to conflicts oflaws rules.

6.8 Entire Agr eement. This Agreement sets forth the full and complete understanding of the Parties relating to the subject matter hereof as of the date hereof, and supersedes any and all negotiations, agreements, understandings and representations made or dated prior thereto with respect to such subject matter.

6.9 Amendments. No change, amendment or modification of this ·Agreement shall be valid or binding upon the Parties unless such change, amendment or modification shall be in writing and duly executed by all Parties.

6.1 0 Successors. This Agreement and the covenants and agreements herein contained shall inure to the benefit of and be binding upon the Parties hereto, their successors and assigns.

6.11 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. In the event that this Agr~ement is delivered by facsimile transmission or by e-mail delivery of a ".pdf' format date file, such signature shall create a valid and binding obligation of the Party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or ".pdf' signature page were an original thereof.

{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK;

SIGNATURES ON FOLLOWING PAGE}

MANAGEMENT SERVICES AGREEMENT PAGE6

ZCC-40-137661

0643.0006

IN WITNESS WHEREOF, each of the Parties has caused this Management Services Agreement to be duly executed on this 27th day of April 2009 to be effective as of the Effective Date.

ZACHRY:

ZACHRY INDUSTRIAL, INC., a Delaware corporation

By: Nrune:~~~~~~~~~~~~------­ Title:

MANAGER:

ZACHRY CONSTRUCTION CORPORATION, a Delaware corporation

MANAGEMENT SERVICES AGREEMENT SIGNATURE PAGE

ZCC-40~137662

0643.0007

EXHIBIT "A"

CONSTRUCTION CONTRACTS

1. Contract for Bayport Terminal Complex Phase lA Wharf and Dredging Contract, dated May 24, 2005, by and' between Zachry Construction Corporation and Port of Houston Authority (File Number: 2004-0 187).

2. Contract for Bayport Terminal Complex Phase IA Container Yard, dated June 28, 2004, by and between Zachry Construction Corporation and Port of Houston Authority (File Number: 2004-0225).

3. Contract for Bayport Cruise Terminal Complex Phase 1-Site and· Utilities, dated November 28, 2005, by and between Zachry Construction Corporation and Port of Houston Authority (File Nwnber: 2~05-0394).

4. Zachry Project 5922 -Project No. 15-2897, Contract No. 5494, Harte Research Institute Building, Texas A&M University- Corpus Christi, Contract Awarded: May 14, 2003.

5. Zachry Job 7634 -- Project No. 16-2931, Contract No. 5567, Kinesiology Facilities Texas A&M International University, Contract Awarded: January 13, 2006.

6. The Comprehensive Development Agreement with an effective date of October 1, 2004, as amended, between Zachry and the Texas Department of Transportation for the development of an approximate 7.4-mile segment of State Highway 45 Southeast, a proposed controlled access transportation facility extending from Interstate Highway 35 at Farm-to-Market 1327 south of Austin to SH 130/US Highway 183 in Travis County.

MANAGEMENT SERVICES AGREEMENT EXHIBIT"A"

ZCC-40-137663

0643.0008

TAB 38

Pass-through Agreement (PX642)

CLAIMS PASS-THROUGH AGREEMENT This Claims Pass-Through Agreement ("Agreement") is entered into effective as of January 1, 2008 (the "Effective Date") by and between ZACHRY INDUSTRIAL, INC., a Delaware corporation, formerly known as Zachry Construction Corporation ("Zachry"), and ZACHRY CONSTRUCTION CORPORATION, a Delaware corporation ("ZCC"). Zachry and ZCC may be referred to in this Agreement collectively as the "Parties" and individually as a "Party."

RECITALS

A. Prior to the Effective Date, Zachry entered into a construction contract and associated documentation with the Port of Houston Authority, Harris County, Texas ("Port of Houston") for construction work related to a wharf and dredging project at the Bayport Terminal Complex, as such construction contract ·is described on Exhibit "A" attached hereto (the "Bayport Contract").

B. Zachry and ZCC entered into a Management Services Agreement, as of the Effective Date ("Management Services Agreement") pursuant to which Zachry subcontracted with ZCC to perform work and other obligations of Zachry under the Bayport Contract and other construction contracts.

C. The Port of Houston has materially breached the Bayport Contract and Zachry and ZCC have each suffered damages arising from or in connection with such breach giving rise to the claims set forth in the lawsuit styled Zachry Construction Corporation n/kla Zachry Industrial, Inc. vs. Port of Houston Authority of Harris County, Texas, Cause No. 2006-72970 rr (District Court of Harris County, 15 Judicial District of Texas) (the "Claims").

D. The Port of Houston's breaches of the Bayport Contract have damaged Zachry before January 1, 2008 and have directly damaged Zachry's subcontractor, ZCC, after January 1, 2008. Zachry and ZCC agree that it is in their mutual best interests for Zachry and ZCC to pursue Claims against the Port of Houston in the name of Zachry. The Claims include those Claims of Zachry before January I, 2008 ("Zachry Claims"), as well as the damages incurred by ZCC from and after January 1, 2008, the effective date of the Management Services Agreement (the "ZCC Claims"). The parties desire, therefore, to agree upon a procedure through which they will coordinate the preparation, presentation and prosecution of the Claims against the Port of Houston.

NOW, THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Zachry and ZCC agree as follows:

No. 2006-72970 CL.A IMS PASS-THROUGH AGREEMENT ZCC EXHIBIT ZCC-40-137664 642 0642.0001

ARTICLE 1 PASS-THROUGH AND CLAIMS PROSECUTION

1.1 Pass-Through. Zachry agrees, and acknowledges it is liable to ZCC, to present the ZCC Claims and remit any recovery from the Port of Houston to ZCC, in accordance with the terms of this Agreement. ZCC agrees that the liability of Zachry to ZCC is liquidated to the extent of the recovery against the Port of Houston for the ZCC Claims. Zachry agrees to pass any such recovery to ZCC to the extent, and only to extent, of any amount actually recovered from the Port of Houston. ZCC agrees that upon Zachry meeting such obligations it shall have no further liability to ZCC arising from the ZCC Claims.

1.2 Delegation of Prosecution. Zachry agrees that ZCC may pursue the Claims against the Port of Houston in Zachry's name. ZCC shall include in the Claims the amount of the Zachry Claims and the ZCC Claims. ZCC shall diligently pursue the Claims. ZCC shall have the responsibility for the preparation ef any claim, the presentation and prosecution of any such claim, and the conduct of any litigation.

1.3 Cooperation. Zachry shall cooperate fully with ZCC including, but not limited to, passing on the Claims to the Port of Houston and executing such documents that may be required to further the Claims; and ZCC shall cooperate fully with Zachry. Upon request, one party may review and copy or be provided at no cost a copy of any writings, letters, reports, analysis, drawings, schedules, charts, photos or any other documents relating to the Claims in the possession, custody or control of the other party.

1.4 Settlement. The right to abandon, settle, compromise or dismiss the Claims shall be shared by ZCC and Zachry. Zachry and ZCC shall each not settle the Claims without the other party's prior written approval.

1.5 Costs. All costs, fees and other expenses (including expert and attorney fees)

incurred by ZCC in connection with the preparation, prosecution and litigation of the Claims shall be paid by ZCC. ZCC shall have no responsibility for any attorney fees or expenses that Zachry may elect to incur.

1.6 Witnesses and Documents. Zachry shall provide, at no cost to ZCC, Zachry employees as witnesses and their respective documents relating to the Claims. Zachry and ZCC will cooperate as fully as possible in regard to witnesses and documents. Zachry will provide any Zachry employees and witnesses, at mutually agreed times and in mutually agreed amounts oftime so as not to hinder or delay Zachry's ongoing operations.

1. 7 C laims Payment. Zachry and ZCC shall direct that any payment on the Claims shall be paid to ZCC in accordance with this Agreement.

1.8 Services Agreement. The parties expressly acknowledge that the Management Services Agreement shall remain in full force and effect except to the extent that any provisions of the Management Services Agreement are inconsistent with or superseded by the terms of this Agreement.

CLAIMS PASS-THROUGH AGREEMENT PAGE2

ZCC-40-137665

0642.0002

ARTICLE2 MISCELLANEOUS PROVISIONS

2.1 Joint Effort. Preparation of this Agreement has been a joint effort of the Parties and the resulting document shall not be construed more severely against one of the Parties than against the other.

2.2 Severability. The invalidity of one or more phrases, sentences, clauses, Sections or Articles contained in this Agreement shall not affect the validity of the remaining portions of the Agreement so long as the material purposes of this Agreement can be determined and effectuated.

2.3 Further Assu rances. Each Party agrees to execute and deliver all further instruments and documents, and take all further action not inconsistent with the provisions of this Agreement that may be reasonably necessary to perform the Services and to effectuate the purposes and intent of this Agreement.

2.4 No T hird Party Beneficiary. This Agreement is not intended to, and does not, confer upon any Person other than the Parties any rights or remedies hereunder other than the Parties' respective affiliates. Without limiting the generality of the foregoing, Nothing in this Agreement shall be construed to create any duty to, standard of care with respect to, or any liability to any Person who is not a Party to this Agreement.

2.5 Governing Law. This Agreement shall be governed by and construed under the laws of the State of Texas, without reference to conflicts of laws rules.

2.6 Entire Agreement. This Agreement sets forth the full and complete understanding of the Parties relating to the subject matter hereof as of the date hereof, and supersedes any and all negotiations, agreements, understandings and representations made or dated prior thereto with respect to such subject matter.

2.7 Amendments. No change, amendment or modification of this Agreement shall be valid or binding upon the Parties unless such change, amendment or modification shall be in writing and duly executed by all Parties.

2.8 Successors. This Agreement and the covenants and agreements herein contained shall inure to the benefit of and be binding upon the Parties hereto, their successors and assigns.

2.9 Rules of Interpretation. The terms "herein," "herewith" and "hereof' are references to this Agreement, taken as a whole. The term "includes" or "including" shall mean "including, without limitation." References to a "Section," "subsection," "clause," "Article," "Exhibit," "Appendix" or "Schedule" mean a Section, subsection, clause, Article, Exhibit, Appendix or Schedule of this Agreement, as the case may be, unless in any such case the context requires otherwise. References to a given agreement, instrument or other document shall be a reference to that agreement, instrument or other document as modified, amended, supplemented and restated through the date as of which such reference is made. References to a Law includes all amendments or modifications thereto, all rules and regulations promulgated under such Law and all administrative and judicial authority exercisable thereunder. Reference to a Person

CLAIMS PASS-THROUGH AGREEMENT PAGE3

ZCC-40-137666

0642.0003

include its successors and permitted assigns. The singular shall include the plural and the masculine shall include the feminine, and vice versa. References to "days" shall mean calendar days, unless the context specifies otherwise.

2.10 Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which counterparts, when so executed and delivered, shall be deemed to be an original and all of which counterparts, taken together, shall constitute but one and the same Agreement. In tJ?.e event that this Agreement is delivered by facsimile transmission or by e-mail delivery of a ".pdf' format date file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or ".pdf' signature page were an original thereof.

{REMAINDER OF PAGE iNTENTIONALLY LEFT BLANK;

SIGNATURES ON FOLLOWING PAGE}

CLAIMS PASS- THROUGH AGREEMENT PAGE4

ZCC-40-137667

0642.0004

IN WITNESS WHEREOF, each of the Parties has caused this Claims Pass-Through Agreement to be duly executed on the 27'11 day of April 2009, to be effective as of the Effective Date.

ZACHRY:

ZACHRY INDUSTRIAL, INC., a Delaware corporation

ZCC:

ZACHRY CONSTRUCTION CORPORATION, a Delaware corporation

By: ~j~ Name: Qg,y i d P.f.Clchry Title: 'Pr,.nd.e.rt± an d. Ch,·e:.£ liY,cvl1ve. d.#."ur

CLAIMS PASS-THROUGH AGREEMENT SiGNATURE PAGE

ZCC-40-137668

0642.0005

EXHIBIT "A"

BAYPORT CONTRACT

1. Contract for Bayport Terminal Complex Phase lA Wharf and Dredging Contract, dated May 24, 2005, by and between Zachry Construction Corporation and Port of Houston Authority (File Number: 2004-0 187).

CLAIMS PASS-THROUGH AGREEMENT EXH!BIT"A"

ZCC-40-137669

0642.0006

TAB 39

Excerpts from Construction Management Agreement (PX57.0001-10, 57.0033)

Bayport Terminal Complex Phase lA

Construction Management Plan

Prepared for

Port of Houston Authority Executives Offices 111 East Loop North Houston, TX 77029

June 1,2004

No. 2006-72970 ZCC EXHIBIT

57

CH2MHILL

0057.0001

BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN

Table of Contents

1.0 Introduction 1 1.1 Purpose 2 1.2 Project Description 2 2.0 Staffing Plan 3 2.1 Project Organization 4 2.2 Construction Manager 4 2.2.1 Construction Manager Level of Authority .4 2.3 Lead Inspector 5 2.4 Civil/Structural/Electrical Inspectors 6 2.5 Office Engineer 6 3.0 Communications Plan 7 3.1 Community Outreach 8 3.2 Complaints 8 3.3 Constructware® 8 3.4 Directory of Personnel 9 3.5 Flow of Communications 9 3.5.1 Formal Communications 9 3.5.2 Informal Communications 9 3.6 Meetings 10 3.6.1 Pre-Construction Conference 10 3.6.2 Pre-Installation Conference 12 3.6.3 Weekly Construction Coordination Meeting 13 3.6.4 Monthly Progress Review Meeting 13 3.6.5 Safety Task Assessments and Tool Box Meetings 13 3.6.6 Unscheduled Meetings 13 3.7 Notifications 13 3.8 Reporting 14 3.8.1 Weekly Progress Report.. 14 3.8.2 Monthly Progress Report 14 3.9 Stakeholder Communication 15 3.10 Third Party Communications 15 4.0 Field Work Plan 16 4.1 Administrative and Technical Support 17 4.2 Air Emissions 17 4.3 Audits 17 4.4 Claims 17 4.5 Contract Modifications 18 4.6 Daily Inspection Diaries 19 4.7 Deficient Construction Materials and Workmanship 19 4.8 Delays and Time Extensions 19 4.9 Dispute Resolution 20 4.10 Equipment and Materials 20

I

0057.0002

BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN

4.11 Equipment / Material Storage 20 4.12 Equipment Start-Up and Testing 21 4.13 Field Office 21 4.14 Field Orders 21 4.15 Filing System 21 4.16 Fill Material Policy 22 4.17 Forms & Reports 22 4.18 Inspection and Testing 22 4.19 Light 22 4.20 Noise 23 4.21 Notices to be Posted by Contractor 23 4.22 Permits 23 4.23 Progress Payment Requests 23 4.24 Progress Photographs 24 4.25 Record Drawings 24 4.26 Requests for Information 25 4.27 Safety 25 4.27.1 CM Field Staff Safety 25 4.27.2 Contractor Safety 26 4.27.3 Visitor Safety 27 4.28 Schedule 27 4.28.1 Baseline Progress Schedule 27 4.28.2 Progress Schedule Updates 27 4.28.3 Phase 1A Milestone Schedule 28 4.29 Spare Parts 28 4.30 Submittals 28 4.31 Surveying Information and Support 29 4.32 Staff Training and Start-Up Support 29 4.33 Technical Specification Reference Standards 29 4.34 Visitors Log 29 4.35 Warranty / Guarantee Data 30 5.0 Quality Assurance Plan 31 5.1 Quality Assurance Procedure for Construction 32 6.0 Risk Mitigation Plan 33 6.1 Contract. 34 6.1.1 Budget 34 6.1.2 Schedule 34 6.1.3 Scope 34 6.2 Electronic Data 34 6.2.1 Assure-It Database 34 6.2.2 Constructware® 35 6.3 Environmenta1. 36 6.3.1 Air 36 6.3.2 Cultural Resources 36

II

0057.0003

BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN

6.3.3 Hazardous Materials 36 6.3.4 Light 37 6.3.5 Noise 37 6.3.6 Spills 37 6.3.7 Water Quality 37 6.3.8 Wildlife 38 6.4 Facilities 38 6.4.1 Computers 38 6.4.2 Electric Carts 39 6.4.3 Field Office 39 6.4.4 Personal Digital Assistants .40 6.5 Hard-Copy Data 40 6.5.1 Final Redline As-Built Drawings, Submittals and CCD .40 6.5.2 Operation and Maintenance Manuals .40 6.5.3 Photos 41 6.5.4 Product Data and Shop Drawings .41 6.5.5 Project Vertical Files (Correspondence, Logs, etc.) .41 6.6 Human Resources 41 6.6.1 CH2M HILL Program Staff .41 6.6.2 CM Field Staff 41 6.6.3 Contractors 42 6.6.4 Designers of Record 43 6.6.5 PHA 3rd Party Inspection and Testing Firms .43 6.7 Public 44 6.7.1 Activists 44 6.7.2 Bayport Channel Users 44 6.7.3 Media 44 6.7.4 Port Road Users 44 6.7.5 Terrorism 45 6.8 Stakeholder Management 45 6.9 Unidentified Risks 45 7.0 Closeout Plan 46 7.1 Substantial Completion and Punch List.. .47 7.2 Final Completion 47 7.3 Closeout Modification 47 7.4 Final Payment Request 48 7.5 Construction Completion Report .48 7.6 Documents and Records Turnover .48 7.7 Archives 48

III

0057.0004

BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN

Attachments

Attachment 1- Construction Management Team Organizational Chart Attachment 2 - CM Field Staff Responsibilities Matrix Attachment 3 - Workflow Charts: Change Orders, RFIs, Submittals Attachment 4 - Weekly and Monthly Progress Report Checklists Attachment 5 - CH2M HILL Construction Claims Manual Attachment 6 - Field File Numbering System and Checklist Attachment 7 - Construction Management Forms and Reports Attachment 8 - Construction Inspection Checklists Attachment 9 - CH2M HILL Bayport Phase lA Field Safety Instructions Attachment 10 - Quality Assurance Procedure for Construction

IV

0057.0005

1.0 Introduction

0057.0006

BAYPORT TERMINAL COMPLEX PHASE 1A CONSTRUCTION MANAGEMENT PLAN

1.1 Purpose The purpose of this Construction Management Plan (CMP) is to provide the framework for construction management consistency, continuity, quality control, timeliness and teamwork for successful completion of Phase 1A of the Port of Houston Authority's (PHA) Bayport Terminal Complex. The CMP will outline common procedures to be utilized by the Construction Management Team (CMT), which consists of CH2M HILL Program and Construction Management (CM) staff, PHA representatives, contractors and the Designers of Record (DOR) for the Phase 1A construction contracts. The CMP will be the reference document providing continuity for all CMT members involved in Phase 1A construction. It will define the construction contracts' specific quality assurance requirements, consolidate current construction management field policy for easy reference and retrieval, and outline the relationships of the various functions to be performed by the CMT members. The CMT members will use the CMP as a guidance document to ensure Phase 1A of the Bayport terminal complex is built to the highest available standards of quality and in accordance with the general and technical provisions of each Phase 1A contract.

1.2 Project Description CH2M HILL is providing Program and Construction Management services to PHA for the initial development phase of the estimated $1.2 billion Bayport Terminal Complex. The Port of Houston is the busiest port origination/ destination on the United States Gulf. The Port is the world's sixth largest port and is the number one u.s port in foreign tonnage, transshipping more than 150 million tons of cargo annually. At ultimate build-out, the Bayport Terminal Complex will be the largest container transshipment facility in the United States and include inter-modal rail transfer facilities, cruise terminals and associated commercial developments supporting both the container and cruise terminals. CH2M HILL acts as the Port's primary contact for the initial project development phase, providing oversight, communication and coordination for multiple facility design and construction contracts. Phase lA, the initial development, consists of the design and construction of 1,660 linear feet of reinforced concrete container wharf supported by reinforced concrete drilled piers; reinforced concrete tangent bulkhead wall; access/berthing dredging and on-site disposal of dredged materials; clearing, grubbing and earthwork; heavy duty reinforced concrete and asphalt paved container handling, storage and transfer yard; signage and pavement markings; electrical substation, transmission and distribution utilities; elevated water storage tank, fire and potable water transmission and distribution lines; storm water drainage lines and storm water pollution prevention facilities; sanitary sewer, pumping station and force mains; site lighting; site security/monitoring, fire alarm/ detection, communications and electronic data utilities; temporary and Amenities buildings; and associated construction activities.

2

0057.0007

2.0 Staffing Plan

3

0057.0008

BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN

2.1 Project Organization The Bayport Terminal Complex Phase 1A CMT will serve as the construction administration and management representatives for PHA. The CMT, in this role, will coordinate all construction activities and services required for the successful completion of Phase 1A construction. The on-site CM Field Staff will consist of a Construction Manager (CM), an Office Engineer, a Lead Inspector, and Civil/Structural/Electrical Inspectors. This staff will be provided by CH2M HILL and its sub-consultants. The CMT also includes PHA project management and construction administration staff; Designers of Record (DaR) for each construction contract; CH2M HILL construction administrative and technical support staff; PHA construction materials testing firms; and any other involved parties performing construction related activities and services. The CM will report directly to PHA's Bayport Project Manager, Chief Engineer, Project Engineer, and Chief Inspector as well as the CH2M HILL Program Manager (PM). The CM will coordinate and oversee the daily activities of the CM Field Staff, 3rd party testing laboratory personnel, 3rd party surveyors, 3rd party inspectors and auditors, and other CMT members involved in the construction work. The CM is directly responsible for the coordination and oversight of the CM Field Staff. The CMT organizational chart is shown on Attachment 1, "Construction Management Team Organizational Chart." The individual roles and responsibilities of the CM Field Staff are shown on Attachment 2, "CM Field Staff Responsibilities Matrix."

2.2 Construction Manager The CM shall act as the PHA's representative on site during construction of Phase 1A. The CM shall be the Inspector for the work and have all authority delegated to the Inspector by the contract documents. The CM will coordinate the activities of all contractors and DOR performing work on site during Phase 1A construction, and will be responsible for implementation of the Staffing Plan, Communications Plan, Field Work Plan, Quality Assurance Plan, Risk Mitigation Plan, and Closeout Plan as described in this CMP.

2.2.1 Construction Manager Level of Authority As an extension of the PHA staff, the CM will have all authority normally attributed to a CM acting as owner's agent (not at risk) on a construction project. The CM will have the authority to inspect, monitor and control activities on the project site as necessary to protect PHA's liability with regard to project scope, schedule, quality, security, and permit compliance, in accordance with industry-standard practice.

The CM will not have any authority to make changes to any provisions of the PHA- Contractor construction contract documents in regard to costs (increase or decrease in contract price); time for completion (accelerated or extended contract completion

4

0057.0009

BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN

time); or quality of in-place work (lessen or increase the contract quality requirements for construction materials and/ or workmanship).

The CM will have the authority to control communications and documentation contributing to the permanent project record, clarify and interpret construction contract documents, and make on-site field administrative/ engineering/ quality assurance decisions, subject to the limitations outlined above. The CM will promote harmonious communication, cooperation and coordination between all contractors and construction activities. The CM will investigate on-site field deficiencies/ discrepancies/ problems and resolve them, if no changes to the construction contract cost, time for completion and/ or construction materials and/ or workmanship are required. If the resolution of an on-site field deficiency/discrepancy/problem requires a change to the contract cost, time for completion and/ or quality of construction materials and/ or workmanship, the CM will investigate and make recommendations to the Port of Houston Authority's Chief Engineer for resolution.

The CM will provide no direction related to the Contractor's construction means, methods, procedures, safety, sequencing and/ or techniques. The CM will observe and report on the Contractor's construction safety, workmanship and materials, as it relates to quality assurance and the in-place construction work being in conformance with Construction Contract Documents (CCD) (i.e., construction contract General and Special Conditions, drawings, technical specification sections and approved Contractor submittals).

2.3 Lead Inspector The Lead Inspector will be responsible for the construction documentation and quality assurance of multiple construction contracts awarded for Phase lA. The Lead Inspector will report to the CM and will oversee and direct the work efforts of the Inspectors. The Lead Inspector will be expected to maintain complete, up-to-date and detailed knowledge of all pertinent construction contract documents; administrative and technical submittals; change orders; field orders; progress schedules; drawings; plans; technical specifications; and administrative status reports. The Lead Inspector will observe and monitor the contractors' planning and execution of the work and perform quality assurance inspections of materials and workmanship to assure compliance with the CCD. The Lead Inspector will act as liaison between the contractors, Inspectors and PHA's construction inspection and materials testing personnel. The Lead Inspector will be responsible for the use and implementation of Personal Digital Assistants (PDA's) for field inspection activities; use of the proprietary Assure-It database for analysis and reporting of QA/QC data; preparation of daily, weekly, and monthly construction progress reports; making recommendations on contractors' progress payment requests and invoices; maintaining a daily log and photos of the contractors' construction activities, staffing, equipment, and materials; documenting contractor performance and safety issues; and resolving on-site construction conflicts.

5

0057.0010

BAYPORT TERMINAL COMPLEX PHASE 1ACONSTRUCTION MANAGEMENT PLAN

4.28.3 Phase 1A Milestone Schedule The CM Field Staff will create and maintain an overall Phase lA Milestone Schedule based on the Contractors' approved baseline Progress Schedules.

The CM will use the contractors' accepted Progress Schedule Updates to update the Phase lA Milestone Schedule on a monthly basis, or more frequently, as requested by the PHA.

4.29 Spare Parts CM Field Staff will take possession of all spare parts to be provided by construction contractors, in accordance with the requirements of the project CCD. Contractors will tag (CH2M HILL Standard Spare Parts Identification Tag-Form No. 399) all spare parts to be turned over to the CM Field Staff. This turnover action will be documented (CH2M HILL Standard Spare Parts Transfer Form-Form No. 289) by the contractor and CM Field Staff. CM Field Staff will prepare and maintain a record (CH2M HILL Standard Spare Parts Transfer Log-Form No. 404) of all spare parts transfers.

4.30 Submittals The Contractor for each Phase lA construction contract will be responsible for developing a list of submittals required by the CCD. Submittals lists will be reviewed by the CM for completeness. A static electronic copy of each Submittal List will be posted in Constructware®. All submittals requiring action to be taken by a reviewing/ approving party will be submitted by the contractor (PHA General Conditions Section 5.20 "Submittals to be Furnished by the Contractor after Award") to the CM using Constructware®. The Contractor will be responsible for following any electronic submittal with hard copy materials, if any, sent to the appropriate party for review. The CM will distribute these submittals to the appropriate reviewing party. Once the reviewing party has reviewed, approved or indicated the actions to be taken by the contractor to obtain approval, the submittal will be returned to the contractor through the CM. The reviewing party will electronically annotate all reviewed contractor submittals, indicating action(s) to be taken by the contractor: no exception taken; make corrections noted; rejected; revise and resubmit; or submit specified item. The review notation will include places for the reviewer's electronic signature and date of signature. Informational submittals will also be submitted by the contractor through the CM in the same manner as described above. The CM Field Staff will document, distribute, file and log all submittals using Constructware®.

28

0057.0033

TAB 40

Court’s Ruling on Directed Verdict (71:8-15)

Plaintiff's Motion for Directed Verdict

1 denied.

2 MS. YEATES: Thank you, Your Honor.

3 THE COURT: Now, would you give me a

4 moment with respect to Zachry's motion? I just want to

5 make a couple of quick notes.

6 Okay. Ms. Greer, or Mr. Gibbs, whoever.

7 PLAINTIFF'S MOTION FOR DIRECTED VERDICT

8 MR. GIBBS: Yes, Your Honor. At this

9 time, Your Honor, the Plaintiff, Zachry Construction

10 Corporation reurges its motion for directed verdict at

11 the close of the Defendant's case and the close of all

12 the evidence.

13 We filed with you our motion on Monday,

14 January the 11th. I think we gave you a copy on

15 January the 11th. And it was filed January the 13th.

16 And we reurge that motion for instructed

17 verdict, and we also urge the argument Zachry made at

18 the hearing on January the 13th, 2009 (sic) on the

19 record, yesterday, as part of our motion for directed

20 verdict.

21 THE COURT: All right. I'd like to go

22 through the table of contents of that motion, if you

23 have a copy.

24 MR. GIBBS: We do, Your Honor.

25 THE COURT: And also ask that -- if

Plaintiff's Motion for Directed Verdict

1 Ms. Greer wants to -- only because we all worked on the

2 jury charge together -- and the things that I'm

3 prepared to grant with respect to your directed verdict

4 are essentially what's in the jury charge.

5 And so -- at this point, so if we could

6 go through that, point by point. And you maybe could

7 bring to the Court's attention the ones that you think

8 that are granted by virtue of the current language of

9 the jury charge.

10 MS. GREER: Do you want me to -- well, I

11 know a couple of things off the top of my head, then

12 maybe can I take half a minute to look through it?

13 THE COURT: Please.

14 MS. GREER: Okay. Your Honor, we

15 believe that you have ruled -- or we would ask you to

16 rule on directed verdict that Zachry is entitled as a

17 matter of law to recover the damages sustained by New

18 Zachry on the pass-through claim.

19 We believe that's what you've instructed

20 the jury, and we would ask you to grant our directed

21 verdict on that issue.

22 THE COURT: Okay.

23 MS. YEATES: And obviously, Your Honor,

24 we oppose that motion.

Plaintiff's Motion for Directed Verdict

1 COURT'S RULING

2 THE COURT: Very good. Okay. And I

3 have ruled on that, and I will grant that aspect of

4 your motion.

5 MS. GREER: And then, Your Honor, we've

6 also moved for directed verdict on Zachry's failure to

7 comply a claim for the Port's failure to pay $2.36

8 million in the liquidated damages.

9 We believe that you have instructed the

10 jury in --

11 THE REPORTER: Are the mikes on?

12 MR. GREER: -- Question No. 12 that the

13 Court has determined that the Port failed to comply

14 with the contract by failing to pay Zachry $2.36

15 million that the Port has withheld of liquidated

16 damages.

17 THE COURT: Would you grab the

18 microphone, please?

19 (Discussion off the record)

20 THE REPORTER: I'm sorry, I'm having a

21 little trouble hearing you, can you speak up?

22 MR. GREER: Yes.

23 And we would ask you to grant a directed

24 verdict to Zachry on that basis.

25 THE COURT: All right. Go ahead, yes.

Plaintiff's Motion for Directed Verdict

1 MS. YEATES: We also oppose that motion,

2 Your Honor.

3 COURT'S RULING

4 THE COURT: Very good. What I've put in

5 the jury charge and what I'm prepared to grant is that

6 I have determined that the Port has failed to comply

7 with the contract by failing to pay Zachry $2.36

8 million that the Port withheld as liquidated damages.

9 Insofar as you have asked for that in a

10 directed verdict, I'm granting that aspect of your

11 motion.

12 MS. GREER: Okay. Thank you,

13 Your Honor.

14 I believe that's all, Your Honor.

15 THE COURT: All right. I was -- so if

16 you would look at the table of contents with me for a

17 moment. I was looking at -- in the table of contents

18 Roman numeral -- Page Number Roman Numeral II, where

19 you have Roman Numeral V -- 5, where it says, Zachry is

20 entitled to a directed verdict on its right to recover

21 damages sustained by New Zachry.

22 Is that covered by what I've previously

23 set?

24 MS. GREER: Yes, Your Honor, that is the

25 portion of the directed verdict motion starts on Page

Plaintiff's Motion for Directed Verdict

1 69, that is the portion, that part, Part 5, Roman V is

2 the part that we believe that you have granted a

3 directed verdict motion on in the jury charge, and we

4 ask that you confirm that you granted directed verdict

5 on the arguments made therein.

6 THE COURT: All right. It goes on to

7 say in subparts A -- in Subpart A of that -- in the

8 table of contents or in the motion, The direct verdict

9 is proper because the Port has met the burden to prove

10 that Zachry is not liable to New Zachry and has -- and

11 has not met that burden -- excuse me, because the Port

12 has the burden of proof that Zachry is not liable to

13 New Zachry and has not met that burden.

14 I guess my ruling is as a matter of law

15 that I find that the -- there's a valid pass-through

16 claim and any objections or legal arguments to the

17 contrary by the Port are overruled.

18 MS. GREER: Okay. Thank you,

19 Your Honor.

20 THE COURT: Does that satisfy what

21 you're asking for?

22 MS. GREER: Well, we're asking you to

23 rule as a matter of law that New Zachry,

24 notwithstanding the Port's arguments to the contrary,

25 has the right to -- that Zachry, notwithstanding the

Plaintiff's Motion for Directed Verdict

1 Port's arguments to the contrary, has the right to

2 recover New Zachry's damages as a matter of law in this

3 lawsuit.

4 THE COURT: Right. I think that's what

5 I've granted. I will grant that part of your motion.

6 MS. GREER: Thank you, Your Honor.

7 THE COURT: And I know the Port is

8 opposed to that.

9 MS. YEATES: (Moving head up and down)

10 THE COURT: And I've granted with

11 respect -- I indicated with respect to Roman Numeral VI

12 on Page Roman Numeral III with respect to the $2.36

13 million, and you've moved with respect to the clearing

14 and grubbing, and I'm not speaking for the Port, but

15 it's my understanding that the Port has essentially

16 abandoned that claim in that there was not evidence

17 that the 25,000 or so for clearing and grubbing has

18 been paid?

19 MS. YEATES: That's correct, Your Honor.

20 THE COURT: All right. So I'm granting

21 that part of Zachry's motion.

22 The Port, in our charge conference, we

23 talked about the defense of both release and waiver,

24 and it's my understanding that the Port's contention

25 has been that the waiver argument, not the affirmative

Plaintiff's Motion for Directed Verdict

1 defensive waiver but with respect to I guess the

2 liquidated damages claim?

3 MS. YEATES: Right, Your Honor. With

4 respect to the liquidated damages, we took away or out

5 of the charge, Your Honor took it out, and we're only

6 arguing release.

7 THE COURT: All right. So I guess I

8 will grant a directed verdict then with respect to the

9 waiver aspect of the release argument?

10 MS. GREER: If they're going to abandon

11 it, I think that's sufficient. But --

12 THE COURT: Are you -- do you want to

13 abandon it on the record or what?

14 MS. YEATES: No, Your Honor. The point

15 was that we wanted the charge to be submitted as

16 release as opposed to release and waiver. And that's

17 what Your Honor has done with respect to the liquidated

18 damages.

19 MS. GREER: My understanding was that

20 they aren't seeking submission of waiver because it

21 brought (inaudible) -- well, I'm not going to

22 characterize why they're doing it, but that they are

23 not asking you to submit it is my understanding.

24 MS. YEATES: Your Honor, I won't be

25 objecting or requesting waiver instruction with respect

26 to liquidated damages.

Defendant's Objections to the Court's Charge

1 COURT'S RULING

2 THE COURT: All right. Then I will make

3 no ruling.

4 And I believe, unless you would bring my

5 attention to anything else that we've spoken about with

6 respect to the jury charge, the rest of the motion for

7 directed verdict will be denied.

8 MS. GREER: It is all I can think of

9 right now, Your Honor.

10 THE COURT: Keep your voice up, please.

11 MS. GREER: That's all I can think of

12 right now, Your Honor.

13 MS. YEATES: Your Honor, I think we're

14 ready to do the charge objections.

15 THE COURT: Okay. Let's hear the charge

16 objections.

17 (At the bench, on the record)

18 DEFENDANT'S OBJECTIONS TO THE COURT'S CHARGE

19 MS. YEATES: Your Honor, the Defendant

20 makes its objections to the Court's charge in the

21 presence of the Court and opposing counsel and the

22 court reporter and before the charge has been read to

23 the jury.

24 After we finish making our objections,

25 Your Honor, we get a ruling, then we'll be tendering

TAB 41

Objections to the Charge (71:15-73)

Defendant's Objections to the Court's Charge

1 COURT'S RULING

2 THE COURT: All right. Then I will make

3 no ruling.

4 And I believe, unless you would bring my

5 attention to anything else that we've spoken about with

6 respect to the jury charge, the rest of the motion for

7 directed verdict will be denied.

8 MS. GREER: It is all I can think of

9 right now, Your Honor.

10 THE COURT: Keep your voice up, please.

11 MS. GREER: That's all I can think of

12 right now, Your Honor.

13 MS. YEATES: Your Honor, I think we're

14 ready to do the charge objections.

15 THE COURT: Okay. Let's hear the charge

16 objections.

17 (At the bench, on the record)

18 DEFENDANT'S OBJECTIONS TO THE COURT'S CHARGE

19 MS. YEATES: Your Honor, the Defendant

20 makes its objections to the Court's charge in the

21 presence of the Court and opposing counsel and the

22 court reporter and before the charge has been read to

23 the jury.

24 After we finish making our objections,

25 Your Honor, we get a ruling, then we'll be tendering

Defendant's Objections to the Court's Charge

1 requested instructions to the Court for the Court's

2 consideration.

3 THE COURT: Yes, ma'am.

4 MS. YEATES: Our first objection is to

5 the agency instructions and the preliminary

6 instructions in the charge, Your Honor. Because those

7 instructions we believe erroneously include the

8 apparent authority theory.

9 As Your Honor knows, we believe there's

10 no pleading to support the apparent authority theory

11 and there's been no trial by consent and there's no

12 trial amendment. So we believe that theory should not

13 be in the charge and we object to including it in the

14 charge.

15 Your Honor, I'll ask you to rule on all

16 of them at the end, Your Honor.

17 THE COURT: Oh, all right.

18 MS. YEATES: We believe the apparent

19 authority in the charge is erroneous as a matter of

20 law, Your Honor, because with respect to CH2M Hill's

21 actual authority, Zachry was undisputedly on notice of

22 the limitations of that actual authority.

23 And under Douglass versus Panama, that

24 means the apparent authority theory cannot apply in

25 this case.

Defendant's Objections to the Court's Charge

1 We also object to instructing the jury

2 on apparent authority because the Port is a public

3 entity that can only contract --

4 THE COURT: Slow down a little bit.

5 MS. YEATES: Can only contract in

6 writing and therefore apparent authority cannot apply

7 as a matter of law. I believe you've heard all these.

8 Furthermore, Your Honor, inclusion of

9 the apparent authority theory will improperly allow the

10 jury to believe that CH2M Hill --

11 THE COURT: Ms. Yeates, you got to slow

12 down just a little.

13 MS. YEATES: Okay. Well, I'm sorry,

14 Your Honor, my team is anxious.

15 Inclusion of the apparent authority

16 theory in the charge will improperly allow the jury to

17 believe that CH2M Hill could have apparent authority

18 based on some conduct by the Port that held CH2M Hill

19 out as the Port's agent.

20 In order, you see, Your Honor, to allow

21 -- so that Zachry can argue that they could recover

22 additional work directed by the Port, which is the

23 Texas 271 -- Section 271 of the government code

24 standard.

25 THE COURT: Local government code,

Defendant's Objections to the Court's Charge

1 right?

2 MS. YEATES: Right, Your Honor. And I'm

3 bringing that to the Court's attention because that

4 demonstrates the harmful error in including apparent

5 authority instruction in the charge.

6 THE COURT: Yes.

7 MS. YEATES: We also object, Your Honor,

8 to the instruction concerning the imputation of

9 knowledge, which is included in the Court's agency

10 instructions.

11 That's the instruction that starts, A

12 party's knowledge includes facts known to the party,

13 etcetera. The PJC authorizes no such instructions. As

14 Your Honor knows, we found no Texas case that

15 authorizes such an instruction, and so we object to

16 including it in the charge.

17 Your Honor, we also object to the

18 absence from the charge of an instruction that an agent

19 can be an agent for a party for one purpose but not

20 other purposes.

21 That instruction is supported by the law

22 and the evidence. We don't believe it's submitted by

23 implication from other instructions. And the addition

24 of that instruction is necessary in order for the

25 Court's instructions on agency to be substantially

Defendant's Objections to the Court's Charge

1 correct.

2 Because in this case, a central fact

3 issue presented is whether CH2M Hill was the Port's

4 agent for certain purposes but not the Port's agent for

5 other purposes. In order properly to answer the

6 question, we believe the jury needs this instruction.

7 At the conclusion of our objections, the

8 Port will tender Defendant's Requested Instruction No.

9 1, which would state that that other party may be

10 authorized to act on behalf of a party for some

11 purposes, while not being authorized to act on behalf

12 of that party for other purposes.

13 And the Port objects to the omission

14 from the Court's charge of that instruction.

15 The Port also objects to the omission

16 from the charge, Your Honor, of an instruction charging

17 the jury that in this case, authority for another to

18 act for the Port can arise only from a written

19 agreement made by the Port that allows the other party

20 to act on behalf of and for the benefit of the Port.

21 And again, our argument there,

22 Your Honor, is that the Port can only contract in

23 writing, and therefore it could only can have an agent

24 by writing.

25 The Port will be tendering Defendant's

Defendant's Objections to the Court's Charge

1 Requested Instruction No. 2, which will state in this

2 case, authority for another to act for the Port can

3 arise only from a written agreement made by the Port

4 that allows the other party to act on behalf and for

5 the benefit of the Port.

6 Furthermore, the Port objects to the

7 inclusion in the charge of apparent authority because

8 as a matter of law that theory cannot apply to the Port

9 given the Port's status as a governmental entity with

10 governmental immunity, and so we object on that basis

11 too, Your Honor.

12 Moving to the definition of New Zachry,

13 Your Honor, that's in there because of Your Honor's

14 pass-through ruling.

15 And obviously, we object to the ruling,

16 Your Honor, and to -- well, I'll be objecting to those

17 parts of the charge that go to the ruling because we

18 believe that New Zachry is not the Plaintiff in the

19 case and that Zachry does not have a valid pass-through

20 claim for all the reasons that we argued in our motion

21 to strike, which Your Honor overruled.

22 And principally, Your Honor, you'll

23 remember that's because New Zachry was created and

24 retained by Zachry to be the subcontractor only after

25 the breach occurred and therefore the Port's breach

Defendant's Objections to the Court's Charge

1 could not have caused the damages to New Zachry in this

2 context.

3 So we object to the New Zachry

4 definition, and we'll be objecting to the other

5 instructions on that basis.

6 Your Honor, in your instructions, you

7 instruct multiple times concerning ambiguity and trade

8 custom. We've talked about that.

9 It's our belief that those instructions,

10 because they appear multiple times in the charge,

11 should be in the preliminary instructions one time in

12 the front of the charge.

13 I'm particularly concerned about this

14 with respect to trade/usage because it's our position

15 that there is no evidence to raise a fact issue on the

16 legal standard from when a trade custom or usage

17 arises.

18 And that by instructing the jury

19 multiple times on that, the Judge -- the Court

20 improperly comments on the weight of the evidence by

21 nudging or telling the jury that the Court thinks,

22 Well, there must be a trade custom or usage because I'm

23 asking about it several times in the charge.

24 And we believe that because the trade

25 custom or usage relates to the ambiguity instruction,

Defendant's Objections to the Court's Charge

1 the proper thing to do would be to take the ambiguity

2 instruction and trade custom and usage and put them

3 both in the front of the charge.

4 THE COURT: Slow down. If you want this

5 on the record, you've got to slow down.

6 MS. YEATES: Okay.

7 And if you put it in the front of the

8 charge, Your Honor, you would lead the instruction by

9 saying, In answering questions that require you to

10 decide the meaning of an agreement, you must decide the

11 meaning by determining the intent of the parties at the

12 time of the agreement, and then continue with the

13 Court's instructions on ambiguity.

14 Your Honor, the Port further objects to

15 the inclusion instruction in the charge on trade custom

16 and usage because, as I've stated, Your Honor, there's

17 no evidence to raise an issue on that.

18 Your Honor, I've talked about the

19 ordering of the questions in the charge and we object

20 to the fact that the charge does not have the excuse

21 questions in each cluster following liability.

22 We think that's the appropriate, proper

23 way to do it and we object to not doing it that way,

24 Your Honor.

25 On Question No. 1, I think our only

Defendant's Objections to the Court's Charge

1 objection there at this point is that the Port is

2 charging the jury as to what the jury may consider in

3 deciding Question No. 1, and that's the ambiguity

4 instruction. And again, we think that should be in the

5 front of the charge.

6 Your Honor, moving to Question No. 2 --

7 oh, I'm sorry, also on Question No. 1, the Court

8 instructs the jury not to consider Section 5.10 with

9 respect to breach of 5.10. And the Port objects to the

10 Court giving that instruction.

11 THE COURT: I thought we -- didn't we

12 change that?

13 MS. YEATES: No. It's limited to

14 breach, Your Honor. But remember my position was it

15 shouldn't be in there at all.

16 That's Ms. Greer's concern that there

17 could be an irreconcilable conflict between the two

18 findings.

19 THE COURT: How -- did we change the

20 wording of that though? What question is it?

21 MS. YEATES: It's Question 1.

22 MS. GREER: 1.

23 I think what you had in the draft last

24 night was, In answering this question only, you're not

25 being asked to decide whether the Port failed to comply

Defendant's Objections to the Court's Charge

1 with Section 5.10 of the contract.

2 MS. YEATES: And, you know,

3 Your Honor --

4 THE COURT: Question 1?

5 MS. YEATES: Right. Well, that's

6 just --

7 THE COURT: Oh, yeah. Yeah.

8 MS. YEATES: -- Ms. Greer's concern

9 about irreconcilable findings, Your Honor.

10 But we believe the instruction will

11 mislead and confuse the jury into believing that the

12 jury cannot consider Section 5.10 in determining

13 whether the Port failed to comply with Change Order 4.

14 And we believe that's error, Your Honor,

15 erroneous because Change Order 4 incorporates the rest

16 of the contract to the extent the rest of the contract

17 is not in conflict with Change Order 4.

18 Therefore, at the conclusion of these

19 objections -- well, we object to having the instruction

20 in there at all.

21 But at the inclusion of the objections,

22 we'll be requesting Defendant's Requested Question No.

23 3, which states, However, you may consider Section 5.10

24 in determining whether the Port failed to comply with

25 Change Order 4. You may consider it in deciding

Defendant's Objections to the Court's Charge

1 Question 1.

2 And we think if you're going to give

3 that instruction that's in the charge, Your Honor, that

4 this additional instruction would also be required.

5 And again, this is something we

6 discussed last night.

7 MS. GREER: Our response would be a

8 comment on the weight of the evidence.

9 MS. YEATES: Right.

10 THE COURT: What?

11 MS. GREER: Our response to that

12 argument was that it would be a comment on the weight

13 of the evidence designed to nudge the jury.

14 And in fact, it would tell the jury to

15 adopt the position that Section 2.02, Precedence

16 Provision, as a matter of law does not cause Change

17 Order 4 to trump the general conditions and the

18 technical specifications, 5.10, all those.

19 MS. YEATES: And of course, our

20 position, Your Honor, is if we're going to point the

21 jury in the instruction you're giving and tell them not

22 to consider whether 5.10 is breached, that that leads

23 the jury to believe they're not supposed to look at

24 5.10.

25 THE COURT: I understand.

Defendant's Objections to the Court's Charge

1 MS. YEATES: Okay.

2 Your Honor, on the next instruction I

3 would like to go to under Question 1 is the instruction

4 that states, Furthermore, in answering this question

5 only, you are instructed that nothing in Section 5.41

6 gave the Port the right to issue its revise and

7 resubmit.

8 We believe this instruction is erroneous

9 because it's based on an incorrect construction and

10 interpretation of the contract.

11 It's not -- we don't believe it's a

12 proper -- restatement of what the Court's ruling was

13 intended to go to with respect to your ruling on the

14 meaning of 5.41.

15 And we thought the Court's ruling was

16 going to the point that Zachry was not required to

17 obtain a written change directive or change order in

18 order to recover. And so we believe this instruction

19 goes beyond what we thought the point of the Court's

20 pretrial ruling was.

21 Furthermore, we believe it's erroneous

22 as a matter of law as explained in all our previous

23 objections to the Court's instructions concerning 5.41.

24 And the Court's instruction is based on

25 the erroneous application, we believe, of the so-called

Defendant's Objections to the Court's Charge

1 radical change doctrine, and on the Shintech and

2 Columbia Gas line of cases.

3 And we believe those are inapplicable

4 here because Section 3.09 of the contract, you'll

5 recall, provides that no action or failure to act by

6 the Port can constitute a waiver of a right of the Port

7 under the contract.

8 Moreover, here, the Port didn't

9 relinquish its contractual procedural rights under

10 Section 5.41 even in the event of a breach because the

11 Port's procedural rights under 5.41 go directly to the

12 breach issue, and that's the legal rationale of the

13 Technip case that we've discussed.

14 I believe you've heard these arguments,

15 Your Honor.

16 Also, under the Texas Water Code and

17 other provisions of Texas law, the Port is statutorily

18 prohibited from making any binding contract that's not

19 in writing. And that's exactly what Section 4.1 (sic)

20 is going to when it says, If a contractor is going to

21 do additional work, he has to get a written change

22 order.

23 MS. GREER: That's --

24 THE COURT: 4.1 or 5.41?

25 MS. YEATES: I'm sorry, 5.41. I

Defendant's Objections to the Court's Charge

1 apologize, Your Honor.

2 THE COURT: I just wanted your record to

3 be clear.

4 MS. YEATES: Thank you, Your Honor.

5 Furthermore, the Court's instruction is

6 erroneous as a matter of law because the Port has

7 governmental immunity, which is waived only to the

8 extent permitted by Chapter 271 of the Texas Local

9 Government Code.

10 And we believe Section 5.41 goes

11 directly to whether the amount sought by Zachry comes

12 within that waiver of immunity. The Shintech and

13 Columbia Gas line of cases are not attempting to deal

14 with the situation of governmental immunity.

15 Even if the radical change doctrine or

16 the Shintech line of law applied, they would not make

17 Section 5.41 relevant to whether the Port had the right

18 to revise and resubmit.

19 We believe Section 5.41 does not go to

20 that issue, and that is why we believe the instruction

21 given in connection with Question No. 1 is erroneous as

22 a matter of law.

23 And -- now, Your Honor, it also, the

24 instruction on 5.41 also, we believe, constitutes an

25 impermissible comment --

Defendant's Objections to the Court's Charge

1 THE COURT: Slow down.

2 MS. YEATES: And impermissible comment

3 on the weight of the evidence serving to tilt or nudge

4 the jury to find in Zachry's favor. And the

5 instruction, we believe, is not correct or helpful to

6 the jury.

7 Your Honor, I would now like to, with

8 respect to Question 1, simply reurge our matter of law

9 arguments that we believe we've made to you previously

10 on why the Port believes that it is correct as a matter

11 of law that Change Order 1 didn't -- Change Order 4 did

12 not entitle Zachry to use the frozen cutoff wall.

13 And we've argued all those things,

14 Your Honor, in opposition to the Port's Rule 166(g)

15 motion, and so I'm not going to repeat them here. It's

16 just a law argument.

17 Your Honor, on Question No. 2, we again,

18 have the instruction on ambiguity and trade/usage.

19 And again, we object to including it multiple times in

20 the charge.

21 The Port objects to the instruction

22 under Question No. 2 telling the jury that it may

23 decide the meaning of Section 5.10 and 5.22 by

24 considering trade usage or custom.

25 Your Honor, as you know, there's -- the

Defendant's Objections to the Court's Charge

1 PJC says it's not even clear, it's an appropriate

2 instruction in the charge. And most importantly,

3 Zachry has not adduced evidence to meet the legal

4 standard to raise a fact issue on whether there's any

5 trade custom or usage. So we would object on that

6 basis.

7 We further object to this instruction

8 concerning 5.41 given in connection with Question 2.

9 We believe it's based on an incorrect construction and

10 interpretation of the contract. And therefore, is not

11 a proper restatement of the Court's prior rulings with

12 regard to Section 5.41.

13 We continue to assert all the

14 objections, Your Honor, that we've made during trial to

15 Your Honor's instructions with respect to Section 5.41.

16 Two hours of sleep last night.

17 MS. GREER: Quit bragging.

18 (Laughing)

19 MS. YEATES: And so I'm not going to

20 repeat all of our arguments that I just made a minute

21 ago about why the Shintech line doesn't support the

22 ruling or why the radical change doctrine doesn't the

23 ruling. I won't repeat any of that.

24 And we believe again, that this

25 instruction would be an impermissible and harmful

Defendant's Objections to the Court's Charge

1 comment on the weight, serving to tilt or nudge the

2 jury to find in favor of Zachry.

3 And then I would like to go on now to

4 Question No. 3 on the statutory measure of damages, we

5 agree that Your Honor's instruction is correct, that

6 that is the statutory measure.

7 Our objection here is we believe

8 Zachry's adduced no proof of amounts due and owing

9 under the contract. That's our argument.

10 And therefore, I want to assert it here

11 that we think it's error to ask Question No. 3 because

12 we believe Zachry has no evidence to raise a fact issue

13 that would allow the submission of the statutory

14 measure of damages.

15 Your Honor, we also with respect to the

16 statutory measure of damages, Subpart B in the

17 instruction under Question No. 3, the Port objects

18 because, among other reasons, outside of the written

19 executed change order, the Port cannot direct work for

20 Zachry -- cannot direct Zachry to do additional work.

21 And there is no evidence that Zachry was

22 directed by the Port to do additional work. And

23 therefore, we object to the submission of the second

24 prong of Section 271 because we think there's no

25 evidence to raise the issue and there's no evidence of

Defendant's Objections to the Court's Charge

1 a written executed change order.

2 Your Honor, now we come to the

3 pass-through instructions and I'm not going to repeat

4 all the arguments we made before, Your Honor, but

5 obviously, we believe the pass-through instruction,

6 which is the instruction under Question 3, telling the

7 jury that they should include reimbursable costs

8 incurred by New Zachry.

9 We believe that instruction is improper

10 because we don't think there is a valid -- legally

11 valid, pass-through claim in this case for all the

12 reasons we stated in our motion to strike the

13 pass-through claim.

14 Your Honor, we also object to the way --

15 telling the jury in the pass-through instruction that

16 the jury should include reimbursable costs.

17 We believe that that's an impermissible

18 comment on the weight, nudging the jury to find for

19 Zachry and we think it should say the jury may include

20 reimbursable costs.

21 To make the instruction correct, the

22 Court would need to add the following sentence at the

23 end of the instruction.

24 THE COURT: This is question?

25 MS. YEATES: This is Question 3, the

Defendant's Objections to the Court's Charge

1 pass-through instruction.

2 THE COURT: Okay. Let me get there.

3 MS. YEATES: The instruction that we

4 think would have to be added is, You may include such

5 reimbursable costs only to the extent that Zachry

6 agreed, in the management service agreement, to pay New

7 Zachry such reimbursable costs.

8 At the conclusion of the objections,

9 Your Honor, I'll request that instruction as

10 Defendant's Requested Instruction No. 4.

11 And we believe omitting that instruction

12 makes the pass-through instruction legally defective

13 and erroneous as a matter of law because the

14 fundamental premise of a pass-through claim is that the

15 Plaintiff asserting the claim has to prove the

16 liability of that Plaintiff contractor to the

17 subcontractor.

18 And we believe that's what our requested

19 instruction goes to.

20 Your Honor, you have instructions on

21 Section 5.41, 5.42 and 5.52 and that's under Question 3

22 and that's the instruction which begins, You are

23 instructed that Zachry was not required to take certain

24 actions.

25 We believe the instruction is incorrect

Defendant's Objections to the Court's Charge

1 as a matter of law. I'm going to separately object to

2 this on 5.40 -- as to the extent it goes to 5.41, on

3 the one hand, 5.52, on the other hand and 5.42, on the

4 other hand.

5 The Port continues to assert and does

6 not waive all the objections that we've previously

7 raised to the Court's instructions concerning -- given

8 to the jury already -- concerning 5.41.

9 And for all the reasons I've already

10 articulated, Your Honor, concerning how the radical

11 change doctrine doesn't apply, Shintech line of cases

12 doesn't apply, all those arguments I've already made as

13 to why we believe Your Honor's ruling on Section 5.41

14 is in error, we believe all those reasons make the

15 instructions with respect to this instruction also in

16 error.

17 And we believe the instructions and

18 impermissible comment on the weight of the evidence,

19 the effect would be to tilt or nudge the jury to find

20 for Zachry.

21 The Court's instruction concerning 5.41

22 not requiring a written change order is particularly

23 harmful to the Port because the measure of damages in

24 the charge allows the jury to recover for additional

25 work that Zachry was directed to perform.

Defendant's Objections to the Court's Charge

1 And under Section 5.41 the requirement

2 of a written change order before the contractor is

3 entitled to be paid for additional work is precisely

4 what Section 5.41 is designed to require. And so that

5 is why we believe the instruction and the Court's

6 ruling with respect to 5.41 is harmful error in the

7 case.

8 And we also believe Your Honor's already

9 charged the jury with respect to what they should

10 consider on 5.41 and that they should not be charged in

11 this instruction again.

12 Your Honor, with respect to your

13 instruction on 5.52, here under Question 3, it applies

14 5.52 to the extent 5.52 makes requirements consistent

15 with Section 5.41.

16 And so, therefore, we would just say all

17 of the same objections that we asserted against the

18 instruction on 5.41 also apply with respect to 5.42

19 (sic).

20 And now that takes me to the objections

21 with respect to the instruction on Section 5.42. And

22 the Port objects to those instructions because again,

23 Your Honor, we believe the Court's ruling on Section

24 5.42 is erroneous as a matter of law.

25 We've already explained that we think

Defendant's Objections to the Court's Charge

1 the radical change doctrine doesn't apply to 5.42. And

2 we believe that 5.42 is not invalid under Section

3 16.071 of the Remedies Code because it's not the kind

4 of notice provision that comes within that section

5 under the American Airlines case. And nor does

6 Shintech or Columbia Gas line of cases make 5.42

7 inapplicable in this case.

8 So we, for all the reasons we previously

9 have asserted in our objections to Your Honor's

10 instructions given to the jury on Section 5.42, we

11 object to this instruction on 5.42 included in the

12 Court's charge under Question No. 3.

13 Your Honor, your -- the sentence that

14 you have in the instruction that says, You are

15 instructed that the jury may consider Sections 5.41,

16 5.42 and 5.52 with respect to assessing a party's state

17 of mind, we believe that that instruction repeats what

18 Your Honor has said during trial.

19 To the extent the instruction has been

20 expanded to include 5.52, we would just assert against

21 that instruction, Your Honor, all of the objections

22 that we previously have made to Your Honor's

23 instruction given during trial with respect to the

24 instruction.

25 However -- I think I know where Jenny is

Defendant's Objections to the Court's Charge

1 going -- we believe the instruction needs to be in the

2 charge because of the Court's previous instruction

3 given on these provisions under Question 3.

4 And having decided to instruct the jury

5 under Question 3 with respect to what 5.41, 5.42 and

6 5.52 do not require Zachry to do to recover damages.

7 We do believe it's necessary at this point for

8 Your Honor to repeat the instruction.

9 My problem is, the instruction that Your

10 Honor has given earlier, we objected to because we

11 think it's based on an erroneous ruling -- reading and

12 interpretation and error of law as to those sections --

13 MS. GREER: You're saying you only

14 requested that instruction about state of mind because

15 the Judge is putting in the first instruction --

16 MS. YEATES: Right. Right. It's

17 necessary in the charge because of the first

18 instruction.

19 MS. GREER: Okay.

20 MS. YEATES: Your Honor, on the NDFD

21 exceptions, no damages for delay exceptions,

22 Your Honor, we object to submitting to the jury the

23 instructions concerning those exceptions to the no

24 damages for delay or hindrance provision.

25 Specifically, those are the instructions

Defendant's Objections to the Court's Charge

1 concerning arbitrary and capricious conduct, bad faith,

2 etcetera. Your Honor, Texas doesn't recognize these

3 common law exceptions, and we believe that even if

4 Texas did recognize those exceptions, the language of

5 this particular Section 5.07, no damages for delay

6 clause would preclude application of those exceptions.

7 And there is no evidence and no legally

8 insufficient evidence of damages resulting from a delay

9 or hindrance that could of possibly have been caused by

10 any conduct, egregious conduct of the Port constituting

11 arbitrary and capricious conduct, bad faith, active

12 interference or fraud as defined in the Court's charge

13 under Question No. 3.

14 Also, Your Honor, and I mentioned this

15 to you in the informal charge conference, Your Honor,

16 we object to the instruction concerning the no damages

17 for delay provision, Section 5.07 because that

18 instruction omits the requirement that the Port -- any

19 egregious conduct of the Port, arbitrary and

20 capricious, bad faith, active interference or fraud,

21 that that conduct must be the sole cause of any delay

22 or hindrance damages.

23 A major fact issue in this case is who

24 caused Zachry to be delayed so behind schedule? If --

25 we believe, under the law, Your Honor, if the delay was

Defendant's Objections to the Court's Charge

1 also caused by Zachry, then that delay, even if

2 contributed to by the Port's alleged egregious conduct,

3 cannot constitute an exception to the no damages for

4 delay or hindrance provision.

5 We believe the Court's instructions are

6 defective because they incorrectly omit the sole cause

7 requirement.

8 To correct that omission, the language

9 in the Court's instruction under Question 3 should be

10 modified so that the language refers to a delay or

11 hindrance that was solely the result of the Port's

12 actions, if any, that constituted arbitrary and

13 capricious conduct, etcetera.

14 And we object to the omission of the

15 word solely in the Court's instruction under Question

16 No. 3.

17 Your Honor, with respect to the active

18 interference definition in Question No. 3, the Port

19 objects to that instruction defining active

20 interference because the instruction omits the words

21 taken to before the words unreasonably interfere.

22 We believe the instruction should

23 properly be worded, Active interference means

24 affirmative, willful action taken to unreasonably

25 interfere.

Defendant's Objections to the Court's Charge

1 We believe those words are necessary

2 because to constitute active interference, a party has

3 to intend to interfere.

4 MS. GREER: Wait a second. I thought

5 you agreed that it would be to interfere if you got the

6 second sentence of that instruction. That it would be

7 that unreasonably interferes -- let me get back to my

8 question.

9 I thought the agreement was that you

10 would not object to active interference means

11 affirmative, willful action that unreasonably

12 interferes with the other party's compliance with the

13 contract. You would agree to that, if the Judge

14 submitted active interference requires more than a

15 simple mistake, error in judgment, lack of total

16 effort, or lack of complete diligence.

17 MS. YEATES: Your Honor, the first

18 sentence, as stated, allows an act that we didn't

19 intend to be interference to constitute interference

20 without scienter intention, and so I have to object to

21 that. I can't let that -- no, I object to that.

22 Your Honor, the fraud definition

23 includes recklessness in Question No. 3. Your Honor,

24 we talked about this in our informal charge conference.

25 Our position is that under Texas law

Defendant's Objections to the Court's Charge

1 from the Texas Supreme Court, fraud, as a promise with

2 no intent to perform, can only be intentional fraud;

3 and therefore, we believe it's error to include the

4 reckless fraud instruction in that question.

5 Now, we turn to Question No. 4, and,

6 Your Honor, we asked for this question, we believe it

7 should be in the charge under Casteel. I'm just

8 pointing out that the only reason we asked for it is

9 because Your Honor is allowing Zachry to submit the

10 pass-through damages.

11 And I don't want my failure to object to

12 that question to somehow waive my argument that we

13 believe there's no valid pass-through claim in that

14 case.

15 Similarly, Your Honor, with respect to

16 the break out question, I believe I just talked about

17 the pass-through, that's actually break out question --

18 it's Question No. 5. But I have a similar point to

19 make on Question No. 4, the break out question for

20 delay or hindrance.

21 We asked for that question but I don't

22 want -- we need it because Your Honor has included

23 delay or hindrance in the damages, but obviously, we

24 don't waive our position that delay or hindrance

25 damages are just not recoverable as a matter of law by

Defendant's Objections to the Court's Charge

1 asking Your Honor to give the break out instruction

2 that -- that breaks out under Casteel the dollars that

3 represent the delay or hindrance damages.

4 Your Honor, I now want to turn to

5 Question No. 6, Subsection D, the release instruction,

6 which again includes the ambiguity and trade custom or

7 usage.

8 Again, we object to repeating these

9 instructions over and over again in the charge. And

10 particularly with respect to the releases, Your Honor,

11 that we do not believe there's any evidence to raise

12 the legal standard for what constitutes a trade custom

13 or industry usage. And we believe it's an improper

14 comment on the weight of the evidence.

15 With respect to Question No. 8, which is

16 Zachry's counter-defenses, Your Honor, we talked about

17 this last night. We believe that the waiver

18 instruction, because this is waiver of fraud, should

19 require an additional instruction that would say, With

20 respect to fraud, waiver requires full knowledge of the

21 fraud, and all material facts, and must be made with

22 the intention, clearly manifested, of abiding by the

23 contract and waiving all right to assert deception.

24 And so we'll be requesting that,

25 Your Honor, as Requested Instruction No. 5. Because we

Defendant's Objections to the Court's Charge

1 believe that's necessary to make the definition correct

2 with respect to waiver of fraud.

3 On quasi-estoppel the Port objects to

4 Question No. 8 to the extent that it inquires whether

5 the Port is barred from asserting fraud in the

6 inducement because of quasi-estoppel.

7 We believe as a matter of law, the

8 doctrine of quasi-estoppel does not apply to bar the

9 defense of fraudulent inducement. It cannot be, as a

10 matter of law, that it's unconscionable for a party to

11 assert that it was defrauded.

12 The Port further objects to the

13 instruction on quasi-estoppel given in connection with

14 Question 8 because it fails to tell the jury that the

15 party to be estopped must have taken its previous

16 position with full knowledge of the fraud and all

17 material facts.

18 We'll be tendering Defendant's Requested

19 Instruction No. 6, which would state that with respect

20 to the fraud, the prior position previously taken by

21 the party to be estopped must have been taken with full

22 knowledge of the fraud and all material facts and must

23 have been taken with the intention, clearly manifested,

24 of abiding by the contract and not asserting the other

25 party's deception.

Defendant's Objections to the Court's Charge

1 And we object to the omission of this

2 sentence from the instruction on quasi-estoppel.

3 Finally, Your Honor, with respect to

4 ratification in the charge, the instruction concerning

5 ratification in Question 8 states -- refers to the

6 Port.

7 With respect to the counter-defense, the

8 Port is not making an affirmative claim for fraud. And

9 so at the end of that instruction on ratification it

10 currently says, All right to recover for the deception,

11 and what we were doing is asserting a defense.

12 And so we think it should say, All right

13 to assert the deception, and not all right to recover

14 for the deception since we're not seeking to recover

15 for the deception.

16 MS. GREER: Your Honor, we would need to

17 change that because Ms. Yeates dictated that

18 instruction to you yesterday for what would be an

19 appropriate instruction for ratification, so we would

20 agree that that should go in there then --

21 MS. YEATES: And I apologize for this,

22 Your Honor, we caught this in the middle of the night

23 last night. And I think --

24 THE COURT: So which question?

25 MS. GREER: Question No. 8.

Defendant's Objections to the Court's Charge

1 MS. YEATES: Question 8, ratification,

2 Subsection C. We believe it should say, All right to

3 assert the deception, not all right to recover for the

4 deception.

5 And I'm nearly finished, Your Honor.

6 THE COURT: Wait. Waiving all right to

7 assert?

8 MS. YEATES: Assert the deception.

9 THE COURT: Assert the thought?

10 MS. YEATES: Assert the deception.

11 THE COURT: Okay.

12 MS. YEATES: Your Honor, the Port

13 further objects to the instruction concerning

14 quasi-estoppel because we believe it's wrong and that

15 if fails to tell the jury -- I did that? Okay.

16 And then on Question No. 9 -- oh, we did

17 that already.

18 Your Honor, on Question No. 11 in the

19 Court's charge, the excuse question, we've objected to

20 instructing multiple times in the charge on ambiguity

21 and trade custom, so we object again here to that.

22 And the Port -- now, I want to turn to

23 Question No. 12. The question that tells the jury --

24 oh, this is the instruction in the Court's charge and

25 Your Honor's directed verdict that the Court has

Defendant's Objections to the Court's Charge

1 determined that the Port failed to comply with the

2 contract by failing to pay.

3 And I just want to make the point there,

4 Your Honor, that obviously, we disagree with the

5 Court's ruling that you made on Sections 5.05 and 5.06.

6 And so we have to object to that instruction, and we do

7 object.

8 MS. GREER: My understanding is you

9 don't object to the fact that he is giving the

10 instruction, only to the fact --

11 MS. YEATES: I object to the ruling

12 giving rise to the instruction --

13 MS. GREER: Exactly.

14 MS. YEATES: -- and the instruction

15 wouldn't be in the charge but for the ruling. And but

16 for that ruling, Your Honor, we would be submitting --

17 Your Honor would be submitting in the charge failure to

18 comply questions and damages questions.

19 MS. GREER: But given his ruling, it's

20 an appropriate way to open the -- the excuse question.

21 MS. YEATES: Okay. Your Honor, the Port

22 objects --

23 MS. GREER: Is that correct?

24 MS. YEATES: Your Honor -- Jenny, I'm

25 not required to stipulate what you want me to say.

Defendant's Objections to the Court's Charge

1 The Port objects to instructing the jury

2 -- I didn't object on that basis, you're okay.

3 The Port objects to instructing the jury

4 in connection with Question 12 on trade custom and

5 usage for the same reasons I've said, Your Honor --

6 THE COURT: Slow down.

7 MS. YEATES: -- and so I won't repeat

8 them. The repetition objection and the no evidence to

9 raise trade custom.

10 Your Honor, can I get a ruling on all of

11 my objections, are they all overruled?

12 COURT'S RULING

13 THE COURT: Yes.

14 MS. YEATES: Thank you, Your Honor.

15 And at the conclusion of the objections,

16 I now need to request and hand to Your Honor

17 Defendant's Requested No. 1 -- Defendant's Requested

18 Instructions No. 1, 2, 3, 4, and 5 and 6. All of which

19 we discussed in our objections, Your Honor.

20 And I tender them to Your Honor for

21 ruling and ask Your Honor, If you are going to refuse

22 them, Your Honor, if you would mark them refused and

23 sign each copy for me?

24 THE COURT: Okay. I am refusing these

Plaintiff's Objections to the Court's Charge

1 instructions. I am marking them refused and signing

2 them and they will be made part of the record.

3 MS. YEATES: Okay. And, Your Honor,

4 could we be permitted to take them to the clerk to be

5 filed or would you get them . . .

6 THE COURT: She was here. I will hand

7 them to Veronica, our clerk, as soon as she comes back

8 and I will ask her to file them and also I will ask her

9 to give copies to both sides.

10 MS. YEATES: Thank you, Your Honor.

11 MS. GREER: Your Honor, may I speak?

12 THE COURT: Yes.

13 Oh, Carolyn, do you need a break? You

14 okay?

15 THE REPORTER: No, I'm fine.

16 THE COURT: Okay. Just go slow.

17 PLAINTIFF'S OBJECTIONS TO THE COURT'S CHARGE

18 MS. GREER: Your Honor, Zachry

19 Construction Corporation --

20 THE COURT: Wait. I tell you what, move

21 this way and speak louder, please.

22 MS. YEATES: Here, let's change places.

23 MS. GREER: Your Honor, Zachry

24 Construction Corporation, in the presence of the Court,

25 opposing counsel and before the jury charge has been

Plaintiff's Objections to the Court's Charge

1 read to the jury, presents the following objections to

2 the Court's charge.

3 First, in the admonitory instructions,

4 Zachry is entitled to instruction that states, A

5 party's knowledge includes knowledge of facts that the

6 party acting with the other party's authority has

7 reason to know and that are material to the duties of

8 the party acting with the other party's authority.

9 This is from the Restatement of Third of

10 agency, Section 5.03. And the Williams versus Jennings

11 case, 755 S.W.2d 874, 883, that's Houston. 1988, writ

12 denied.

13 Zachry will separately request its

14 Proposed Issue No. 1 on this issue.

15 With respect to Question No. 1

16 pertaining to Change Order 4, Zachry would object that

17 Change Order 4 unambiguously includes an agreement that

18 Zachry could use the frozen cutoff wall design embodied

19 in the September 9, 2005 design.

20 Accordingly, the issue of the proper

21 interpretation of Change Order 4 should not be

22 submitted to the jury, instead the jury should be

23 instructed as to its meaning.

24 Specifically, the jury should be

25 instructed in the Court's Question No. 1, You are

Plaintiff's Objections to the Court's Charge

1 instructed that Change Order 4 includes an agreement

2 that Zachry could use the frozen cutoff wall design

3 embodied in the September 9, 2005 design.

4 Zachry will separately request its

5 Proposed Issue No. 2 on the proper interpretation of

6 Change Order 4.

7 Furthermore, if the Court does not

8 instruct the jury that Change Order 4 includes an

9 agreement that Zachry could use the frozen cutoff wall

10 design embodied in the September 9, 2005 design, then

11 the jury should be instructed that if they agree with

12 that interpretation, then the general conditions and

13 technical specifications give the Port no right to

14 issue its October 11, 2009 (sic) response.

15 As a matter of law, if the jury finds

16 that the Port agreed in Change Order 4 that Zachry

17 could use the frozen cutoff wall design embodied in the

18 September 9, 2005 design, then under the order of

19 precedence provision of the contract, change orders

20 take precedence over general conditions and technical

21 specifications. That's General Conditions Section

22 2.02(a).

23 The general conditions therefore could

24 not give the Port the right to issue the October 11,

25 2005 response with respect to a design that it had

Plaintiff's Objections to the Court's Charge

1 already agreed to in Change Order 4.

2 The Port (sic) should therefore instruct

3 the jury, If you find that Change Order 4 included in

4 agreement that Zachry could use the frozen cutoff wall

5 design embodied in the September 9, 2005 design, then

6 in answering this question only, you are instructed

7 that nothing in the general conditions or the technical

8 specifications of the contract including but not

9 limited to General Conditions Section 5.22, 5.41, 5.42

10 and 5.52, gave the Port the right to issue its October

11 11, 2005 response to the September 9, 2005 frozen

12 cutoff wall design.

13 Zachry will separately request its

14 Proposed Issue No. 3 on this issue.

15 Alternatively, Zachry would be entitled,

16 consistent with this Court's prior rulings concerning

17 the exclusion of Section 5.42 and 5.52 as well as their

18 inapplicability on their face as a matter of law, to

19 create a right in the Port to issue the October 11,

20 2009 (sic) response.

21 Zachry would be entitled to an

22 instruction that adds Section 5.42 and 5.52 to the

23 instruction that the Court is already giving the jury,

24 such that the instruction would now say, In answering

25 this question, you are instructed that nothing in

Plaintiff's Objections to the Court's Charge

1 Section 5.41, 5.42 or 5.52 gave the Port the right to

2 issue its October 11, 2005 response to the September 9,

3 2005 frozen cutoff wall design.

4 Zachry objects to the absence of this

5 instruction, and will tender a proposed instruction

6 separately. It will be Proposed Issue No. 4.

7 Although Zachry has proposed that the

8 prior instructions be included in the Court's Question

9 No. 1, because that is how the Court has stated it will

10 submit Change Order 4 issues.

11 Zachry believes the issues of the proper

12 interpretation of Change Order 4 and the failure to

13 comply with Change Order 4 should be submitted

14 separately, rather than in one question as submitted by

15 the Court, for the reasons discussed below.

16 Doing so would simplify the issues and

17 make clear to the jury that there are two separate

18 questions, interpretation and breach, that the jury

19 should answer.

20 Zachry will separately tender a proposed

21 instruction on these questions. They will be Proposed

22 Instructions Nos. 5 and 6.

23 Furthermore, combining the

24 interpretation and failure to comply issues into one

25 question obscures the basis for the jury's answers.

Plaintiff's Objections to the Court's Charge

1 That is, Zachry contends that the unambiguous language

2 of Change Order 4 includes an agreement that Zachry

3 could use the frozen cutoff wall design embodied in the

4 September 9, 2005 design.

5 Zachry has also proven as a matter of

6 law that the Port breached its agreement that Zachry

7 could use the frozen cutoff wall design embodied in the

8 September 9, 2005 design.

9 And so the issue of whether the Port

10 failed to comply with Change Order 4 should not be

11 submitted either.

12 If the jury answers no to the Court's

13 Question No. 1, the Court of Appeals will not be able

14 to determine whether one, the jury rejected Zachry's

15 interpretation but found that the Port did not breach

16 Change Order 4, or two, accepted Zachry's

17 interpretation but found that the Port did not breach

18 Change Order 4.

19 By combining an invalid question, the

20 interpretation of Change Order 4, which should be

21 decided as a matter of law by the Court, with a

22 separate question, whether that agreement was breached,

23 which also should be decided as a matter of law by the

24 Court, the charge obscures the basis for the jury's

25 decision, thus preventing the appellate court from

Plaintiff's Objections to the Court's Charge

1 determining whether the jury based its verdict on an

2 improperly submitted ground.

3 This is the Crown Life versus Casteel

4 case, 22 S.W.3d 378, pinpoint 390. Under Casteel, when

5 there is uncertainty as to the legal or evidentiary

6 validity of a jury issue, the issue should be submitted

7 separately.

8 That's Casteel and also Harris County

9 versus Smith, 96 S.W.3d 230, pinpoint 236. Where the

10 Court said, And in a case such as this one, asking the

11 jury to record its verdict as to each element of

12 damages when there is doubt as to the legal sufficiency

13 of the evidence will permit the losing party to

14 preserve error without complicating the charge or the

15 jury's deliberation.

16 Now, moving to Question No. 2 regarding

17 breach of Section 5.10. As a matter of law, nothing in

18 the unambiguous language of Section 5.10 gave the Port

19 the right to issue its October 11, 2005 response.

20 The jury should therefore be instructed

21 in Question No. 2 that nothing in Section 5.10 gave the

22 Port the right to issue its October 11, 2005 response.

23 The jury should not be instructed to determine the

24 meaning of Section 5.10.

25 Zachry will separately request its

Plaintiff's Objections to the Court's Charge

1 Proposed Issue No. 7 on this issue.

2 As a matter of law, nothing in the

3 unambiguous language of Section 5.22 gave the Port the

4 right to issue its October 11, 2005 response.

5 The jury should therefore be instructed

6 in Question No. 2 that nothing in Section 5.22 gave the

7 Port the right to issue its October 11, 2005 response.

8 The jury should not be instructed to determine the

9 meaning of Section 5.22.

10 Zachry will separately request its

11 Proposed Issue No. 8 on this issue.

12 The burden of proof with respect to the

13 Port's right to issue its October 11, 2005 response

14 under Section 5.22 is erroneously placed on Zachry.

15 Section 5.22 is an affirmative defense

16 in which the Port bears the burden of proof.

17 THE COURT: Slow down.

18 MS. GREER: Sorry.

19 Texas law is clear that, quote --

20 THE COURT: Not that slow.

21 MS. GREER: Huh?

22 THE COURT: Not that slow.

23 MS. GREER: Okay. I'm running out of

24 steam.

25 Quote, the burden of proving the

Plaintiff's Objections to the Court's Charge

1 happening of a contingency which, by the terms of the

2 contract, would discharge the party from liability or

3 any default or refusal to perform on the Plaintiff that

4 would excuse the performance of the Defendant, is on

5 the party who seeks to avoid the contract or excuse a

6 failure to perform it on that ground.

7 That's the Howell versus Kelly case from

8 the 1st Court of Appeals in Houston, 534 S.W.2d 737,

9 pinpoint 739 to Page 740.

10 And then from the 14th Court of Appeals

11 case, the Johnson versus McKinney American, Inc. --

12 I'll give you this.

13 9 S.W.3d 271, Page 280. The jury charge

14 erroneously places the burden on Zachry to disprove the

15 Port's right to issue its October 11, 2005 revise and

16 resubmit under Section 5.22.

17 The Section 5.22 should be submitted as

18 an excuse question, placing the burden of proof on the

19 Port.

20 Alternatively, if the Court refuses to

21 ask about Section 5.22 separately from Section 5.10, as

22 in the Court's charge, the placement of the burden on

23 the Port should be accomplished by instruction.

24 In Question No. 2, Zachry is entitled,

25 consistent with the Court's prior rulings concerning

Plaintiff's Objections to the Court's Charge

1 the exclusion of Section 5.42 and Section 5.52, as well

2 as their inapplicability on their face as a matter of

3 law to create a right in the Port to issue the October

4 11, 2009 (sic) response.

5 Zachry is entitled to an instruction

6 that adds Section 5.42 and 5.52 to the instructions the

7 Court is already giving the jury. Such that it would

8 say, In answering this question, you're instructed that

9 nothing in Section 5.41, 5.42 or 5.52 gave the Port the

10 right to issue its October 11, 2005 response to the

11 September 9, 2005 frozen cutoff wall design.

12 Zachry objects to the absence of this

13 instruction, and Zachry will separately request its

14 Proposed Issue No. 9 on this issue.

15 Furthermore, the issue of Section 5.10

16 and Section 5.22 should be submitted separately. By

17 combining the Port's affirmative defense under Section

18 5.22 as Zachry's affirmative claim under Section 5.10,

19 the jury charge obscures the basis for the jury's

20 answer.

21 Zachry has strong arguments as to why as

22 a matter of law the unambiguous language of Section

23 5.10 and Section 5.22 gave the Port no right to issue

24 its revise and resubmit response.

25 As well as why the Port's October 11,

Plaintiff's Objections to the Court's Charge

1 2005 -- 9 -- 5, 2005 response violated Section 5.10 and

2 Section 5.22 as a matter of law. And the contract.

3 Because Zachry's claim for breach of

4 Section 5.10 is combined with the Port's affirmative

5 defense under Section 5.22, and because the question of

6 the proper interpretation and breach of these clauses

7 is part of a single question, the charge obscures the

8 basis for the jury's decision.

9 Thus preventing the appellate court from

10 determining whether the jury based its verdict on an

11 improperly submitted ground. This is again, the

12 Casteel case I cited earlier and Harris County versus

13 Smith.

14 It will be difficult to show on appeal,

15 if the jury answers no to Question No. 3 -- Question

16 No. 2, whether it did so based on its interpretation of

17 Section 5.10 or 5.22 or whether it believed there was a

18 right to revise -- issue a revise and resubmit, but

19 that it was not shown that the Port had no reasonable

20 basis on which to exercise that right.

21 Question No. 3, damages for breach of

22 contract with respect to the frozen cutoff wall breach.

23 Zachry objects to the instruction that you may consider

24 amounts, if any, owed as compensation for increased

25 cost to perform the work as a direct result of

Plaintiff's Objections to the Court's Charge

1 Port-caused delays, if any.

2 Only if you find that such increased

3 costs were a natural, probable and foreseeable

4 consequence of the Port's failure to comply, if any.

5 The Port has never cited a single case for the

6 proposition that these damages are consequential

7 damages, and the sovereign immunity statute itself in

8 no way supports this proposition.

9 The element of damages itself in

10 Question No. 3, which is taken from the sovereign

11 immunity statute, Section 271.153, provides that the

12 increased cost to perform the work must be a direct

13 result of Port-caused delays, which shows they must be

14 direct rather than consequential.

15 Moreover, damages resulting from

16 owner-caused delays are necessarily those which

17 naturally and necessarily flow from a wrongful act and

18 are presumed to have been foreseen or contemplated by

19 the party as a consequence of his wrongful act, and

20 thus are not consequential damages.

21 That's the Anderson Development Corp.

22 case versus Coastal States Crude Gathering, 543 S.W.2d

23 402, pinpoint 404 to 405.

24 Zachry objects to the instruction that

25 you are instructed that you may only consider 5.41,

Plaintiff's Objections to the Court's Charge

1 5.42 and 5.52 to the extent it imposes requirements

2 consistent with Section 5.41 only in assessing a

3 party's state of mind.

4 This instruction is an instruction that

5 was originally made as a limiting instruction to limit

6 the scope of the admissibility of evidence of these

7 clauses. The purpose of the jury charge is to inform

8 the jury of the controlling law.

9 As the pattern jury charge makes clear,

10 the Court must instruct the jury as to its resolution

11 of the meaning of any disputed contract provisions.

12 This is Texas Pattern Jury Charge Section 101.7 in the

13 comments.

14 Nothing authorizes the Court to point

15 out the significance of a particular type of evidence

16 in the jury charge.

17 By giving this instruction, the Court

18 comments on the weight of the evidence and nudges the

19 jury towards the Port's theory.

20 In other words, by giving this

21 instruction, the Court embraces the Port's theory that

22 these clauses can somehow be relevant to Zachry's, or

23 for that matter, the Port's state of mind after the

24 rejection of the frozen cutoff wall occurred on October

25 11, 2009 (sic).

Plaintiff's Objections to the Court's Charge

1 Even though the Court has held that

2 these provisions are inapplicable to bar Zachry's

3 damage claim.

4 The Court suggests to the jury that

5 these provisions are relevant to the party's state of

6 mind and cause undue attention to the Port's theory of

7 the case.

8 Furthermore, the instruction is

9 erroneous. The Port's or Zachry's subjective state of

10 mind is irrelevant where, as here, the Court has

11 construed these clauses as a matter of law.

12 Parole evidence of the party's belief

13 about the meaning of the clauses should not be admitted

14 to vary the Court's construction of these clauses. The

15 instruction simply allows the Port to evade the Court's

16 legal rulings about the inapplicability of these

17 clauses.

18 Zachry objects to the inclusion in the

19 definition of active interference of the sentence,

20 Active interference requires more than a simple

21 mistake, error in judgment, lack of total effort or

22 lack of complete diligence.

23 This instruction is repetitive of the

24 first sentence, which states that active interference

25 means affirmative, willful action that unreasonably

Plaintiff's Objections to the Court's Charge

1 interferes with the other party's compliance with the

2 contract.

3 The second sentence adds nothing as all

4 these matters are covered by the definition of active

5 interference in the first sentence. The addition of

6 the second sentence simply emphasizes the Port's

7 claimed theory of the case to the jury, and is

8 therefore a comment on the weight of the evidence and a

9 nudging instruction designed to encourage the jury to

10 adopt the Port's view of the facts.

11 Under Texas charge practice, the charge

12 may not define a term like active interference in more

13 general terms and then list specific examples of what

14 the Port believes to be active interference. This is

15 akin to marshaling one's evidence in the jury charge.

16 Zachary objects to the inclusion of the

17 Port's mitigation defense as well. As the Texas

18 Supreme Court has held, under mitigation principles,

19 the long-standing law of this state requires a claimant

20 to mitigate damages if it can do so with trifling

21 expense or reasonable exertions.

22 That's the Gunn Infiniti versus O'Byrne

23 case, 996 S.W.2d 854, Page 857 for the pinpoint.

24 As a result, the jury should be

25 instructed that a party is only required to avoid

Plaintiff's Objections to the Court's Charge

1 damages if it can do so with trifling expense or

2 reasonable exertions.

3 Zachry will separately request its

4 Proposed Instruction No. 10 on this issue.

5 Zachry also objects to the definition of

6 bad faith. It imposes too high of a burden. Rather,

7 bad faith in the contract context is dishonesty of

8 believe or purpose.

9 This is from the Restatement Second of

10 Torts Section 205, comment d and also appears in

11 Black's Law Dictionary 8th edition, Page 149.

12 Zachry will request its Proposed

13 Instruction No. 11 on this issue.

14 Question Number 4, percentage delay and

15 hindrance damages. Zachry objects to Question No. 4,

16 which asks about the percentage of Zachry's damages

17 that were due to delay.

18 The Port has lost its argument that the

19 no damages for delay clause is a complete bar to

20 Zachry's damages. It is not entitled to a question

21 inquiring as to the amount of delay damages just in

22 case they lose at trial but win on appeal.

23 There are myriad alternative issues that

24 the parties may be curious about, that does not mean

25 they are submitted. Only issues that are raised by the

Plaintiff's Objections to the Court's Charge

1 written pleadings and the evidence, and that's quote,

2 are submitted. That's Texas Rule of Civil Procedure

3 278.

4 Furthermore, only controlling issues

5 that are essential to a right or action or defense are

6 submitted. That's Paul Mueller Company versus Alcon

7 Labs, 993 S.W.2d 851, Page 854.

8 A controlling issue is one that requires

9 a factual determination to render a judgment in the

10 case. And that's also supported by Rule 277, which

11 provides that the Court shall submit such instructions

12 and definitions as shall be proper to enable the jury

13 to render a verdict. Question No. 4 is not such an

14 issue.

15 Zachry also objects to Question No. 4

16 because it refers to delay or -- delay and hindrance

17 damages. Section 508 of the general conditions bars

18 delay or hindrance damages.

19 You know what, this is one that we might

20 want to talk about. I forgot about that.

21 So to the extent the instruction is

22 given at all, it should track Section 5.08. That is

23 also how it is referred to in Question No. 3.

24 I'm not sure if that was intentional.

25 MS. YEATES: Right. Your Honor, we

Plaintiff's Objections to the Court's Charge

1 would agree to change that. On Question No. 4 it

2 should say delay or hindrance damages. Could we change

3 that?

4 THE COURT: One moment.

5 All right. I am changing that to delay

6 or hindrance. Question 4.

7 Okay. How much more?

8 MS. GREER: I can talk faster. About

9 three pages.

10 THE COURT: All right.

11 MS. GREER: She had 25.

12 Okay. Question No. 5 on reimbursable

13 costs. Okay. Zachry also objects to Question No. 5,

14 which asks what amount of damages the jury found in

15 Question No. 3 were for New Zachry's reimbursable

16 costs.

17 Again, the Port's not entitled to a

18 question on this issue just in case they lose at trial

19 but win on appeal.

20 The Court has held that Zachry is

21 entitled to recover New Zachry's reimbursable costs as

22 a matter of law. Accordingly, the amount of this cost

23 is not a controlling issue that should be submitted.

24 Question No. 6, excuse for the Port's

25 failure to comply. The affidavits and partial releases

Plaintiff's Objections to the Court's Charge

1 of lien are unambiguously only lien releases, and so

2 Zachry objects that the issue should not be submitted

3 at all.

4 Furthermore, to the extent that the

5 Court concludes that the partial lien releases are

6 ambiguous and that there are other reasonable

7 constructions of the partial lien releases besides

8 Zachry's construction, which Zachry vigorously

9 disputes, then the interpretation of the releases the

10 Port previously advanced is at least one reasonable

11 construction.

12 And we dispute it's reasonable, but if

13 you think that there's more than our instruction, then

14 it's at least one reasonable construction.

15 In the Port Authority's motion for

16 partial summary judgment based on partial release

17 executed by Zachry, the Port sought only partial

18 summary judgment to the extent of the damages released.

19 And contended that the lien releases

20 were only partial releases of liens. If the

21 interpretation of the partial lien releases is

22 submitted to the jury at all, the jury should be given

23 the opportunity to make this finding.

24 As Question No. 6 is drafted, the jury

25 can only conclude that the release was a complete

Plaintiff's Objections to the Court's Charge

1 release of Zachry's claim or not a release at all. The

2 jury's improperly precluded from finding that it is a

3 partial release and the amount of damages it releases.

4 Question No. 7, Port's defense of

5 fraudulent inducement to Change Order 4. The

6 instruction regarding fraud is erroneous because it

7 fails to require that the reliance be justifiable.

8 It's the Ernst & Young versus Pacific Mutual Life case,

9 551 S.W.3d 573, 577, Texas Supreme Court.

10 The instruction regarding fraud should

11 not be submitted because there is no evidence that

12 Change Order 4 was fraudulently induced because the

13 Port knew the truth, that Zachry was behind on the

14 schedule.

15 Furthermore, because the Port knew the

16 truth, it could not have relied actually or

17 justifiably.

18 Legal bars also preclude the assertion

19 of the Port's defense of fraud, including that the Port

20 ratified the fraud, the merger clause bars any reliance

21 by the Port as a matter of law, and the election of

22 remedies doctrine bars the Defense because the Port

23 retains valuable benefits under the contract.

24 The submission of the fraud question is

25 extreme -- and we've moved for directed verdict, so you

Plaintiff's Objections to the Court's Charge

1 have those arguments but -- the submission of the fraud

2 question is extremely prejudicial to Zachry because its

3 mere presence in the jury charge suggests to the jury

4 that the Court believes there's some evidence that

5 Zachry committed fraud or some potential basis on which

6 the Port could --

7 THE REPORTER: Some what?

8 MS. GREER: I'm sorry. Potential basis.

9 THE COURT: Potential basis.

10 MS. GREER: On which the Port could

11 recover for fraud against Zachry. Such a perception

12 that Zachry could be a fraudfeasor is highly damaging

13 and --

14 THE COURT: Fraudfeasor?

15 MS. GREER: Fraudfeasor. Highly

16 damaging and an improper comment on the weight of the

17 evidence.

18 Getting close.

19 THE COURT: Is that a real word?

20 MS. GREER: Question No. 8 --

21 (Laughing)

22 MS. GREER: Zachry's -- Question No. 8,

23 Zachry's defenses to the Port's --

24 THE COURT: Wait. In Ms. Greer's

25 defense, she probably got about a half an hour of sleep

Plaintiff's Objections to the Court's Charge

1 last night.

2 MS. GREER: You nailed it.

3 Okay. Question No. 8, Zachry's defenses

4 to the Port's fraudulent inducement defense. Zachry

5 contends that the Port's fraudulent inducement defense

6 is barred as a matter of law under the election of

7 remedies doctrine and therefore should not be

8 submitted.

9 However, to the extent that the Court

10 determines that it is not an issue, that it can be

11 decided as a matter of law, then Zachry is entitled to

12 the submission of its election of remedies defense.

13 Zachry objects to its omission.

14 Zachry will separately request its

15 Proposed Instruction No. 12 on this issue.

16 Question No. 9, withholding of the

17 $600,000. The instruction regarding the withholding of

18 the $600,000 in payment from Zachry is erroneous

19 because it is incomplete.

20 The instruction fails to give the jury

21 any guidance as to the basis on which the Port was

22 purportedly entitled to withhold the $600,000. It does

23 not direct the jury to the withholding clause that the

24 question is apparently referring to, Section 6.05.

25 It does not direct the jury to the

Plaintiff's Objections to the Court's Charge

1 obligation under the contract that Zachry purportedly

2 breached.

3 Zachry will separately request its

4 Proposed Instruction No. 13 on this issue.

5 Question No. 9 also erroneously places

6 the burden of proof on Zachry. The burden of proving

7 withholding, like offset, is on the party asserting it.

8 That's the U.S. versus Use and Benefit

9 of D'Agostino Excavators, Inc., versus Heyward-Robinson

10 Company case that we've previously given you. 430 F2d

11 1077, 1085 to 86, out of the 2nd Circuit.

12 And by analogy, offset is an affirmative

13 defense under the Brown versus American Transfer case,

14 601 S.W.2d 931, pinpoint 936.

15 And also by analogy, proof of the right

16 to withhold liquidated damages is an affirmative

17 defense under the Borders versus KRLB case, 727 S.W.2d

18 357, Page 360 pinpoint.

19 It is a matter of avoidance under Rule

20 94. Consistent with this law, Section 6.05

21 and likewise, Section 6.7 by their plain terms impose

22 the burden of proof on the Port.

23 Indeed, Texas law provides that, as I

24 stated before under the Howell versus Kelly case and

25 the Johnson versus McKinney American case, the burden

Plaintiff's Objections to the Court's Charge

1 of proof on the happening of a contingency that would

2 discharge parties from liability is on the party

3 seeking to avoid liability.

4 Indeed, the Port -- I'm almost done --

5 indeed, the Port has previously and repeatedly taken

6 the position that it has the burden of proof on

7 withholding and offset.

8 And we've cited you the places where

9 they've done that in Plaintiff Zachry Construction

10 Corporation's motion to strike the Port's

11 late-disclosed 10.5 million-dollar offset and

12 withholding defenses and to exclude any evidence in

13 support thereof at Pages 23 through 24 and Footnote 16.

14 Question No. 11, excuse for the Port's

15 failure to pay $600,000. The affidavits and partial

16 releases of lien are unambiguously only lien

17 releases --

18 THE COURT: Slow down. Slow down.

19 MS. GREER: -- and so the issue should

20 not be submitted at all.

21 Question No. 12, failure to comply by

22 withholding the $2.36 million in liquidated damages.

23 Question No. 12.A, point, little Roman

24 II should ask the jury what sum of money, if paid now

25 in cash, would fairly and reasonably compensate the

Plaintiff's Objections to the Court's Charge

1 Port for its damages, if any, that resulted from

2 Zachry's failure to comply that you find answer to

3 Question No. 12.A?

4 The question should then define the

5 element of damages to be considered as the reasonable

6 and necessary cost of repairing the wharf fenders.

7 Otherwise, the jury is receiving no guidance as to what

8 it is they're supposed to determine or how they're

9 supposed to quantify damages.

10 Zachry will separately submit its

11 Proposed Instruction No. 14 on this issue.

12 Question No. 13, attorneys' fees.

13 Attorneys' fees should not be submitted at all because

14 Zachry, as a matter of law, will prevail on its breach

15 of contract claim because the releases are

16 unambiguously lien releases.

17 Accordingly, the Port at most could

18 deduct the sum for the wharf fenders, approximately, 1

19 million from the $2.36 million in damages. Although

20 Zachry disputes that they should be deducted at all.

21 Accordingly, regardless, of what happens

22 on the remaining breach of contract theories, Zachry

23 will have a net recovery on its breach of contract

24 claim, and as a matter of law, the Port cannot be the

25 prevailing party.

Plaintiff's Objections to the Court's Charge

1 And for the foregoing reasons, Zachry

2 objects to the Court's charge and would like a ruling

3 on our objections.

4 COURT'S RULING

5 THE COURT: Okay. Then aside from the

6 couple of small changes we made as we went, your motion

7 is denied.

8 MS. GREER: And I'm offering you the --

9 THE COURT: Or your -- excuse me.

10 MS. GREER: -- requested instructions,

11 and if they are refused, would you mark them refused?

12 THE COURT: Yes. And I will make them

13 part of the record and ask that the clerk provide

14 copies.

15 MS. GREER: Thank you very much,

16 Your Honor.

17 MS. YEATES: Thank you, Your Honor.

18 THE COURT: And for the record,

19 according to Black's Law Dictionary fraudfeasor is in

20 fact a word.

21 MS. GREER: I've heard it before.

22 THE COURT: All right. So now we are up

23 to -- Carolyn, you probably need a break.

24 Okay. I'm going to print out the jury

25 charge then and we'll get copies made for the jury.

TAB 42

Texas Local Government Code §271.151 through §271.160 (Vernon 2005)

548

§ 271.121 PROPERTY ACQUiSITION, SALE, OR LEASE Title 8 Research References Treatises and Practice Aids Brooks, 23 Tex. Prac. Series§ 12.14A, Competitive Bidding-"Best Value" Bidding.

[Sections 2 71.122 to 271.150 reserved for expansion]

SUBCHAPTER I. ADJUDICATION OF CLAIMS ARISING UNDER WRITTEN CONTRACTS WITH LOCAL GOVERNMENTAL ENTITIES

§ 2 71.151. Definitions In this subchapter:

(1) "Adjudication" of a claim means the bringing of a civil suit and prosecution to final judgment in county or state court and includes the bringing of an authorized arbitration proceeding and prosecution to final resolution in accordance with any mandatory procedures established in the contract subject to this subchapter for the arbitration proceedings.

(2) "Contract subject to this subchapter" means a written contract stating the essential terms of the agreement for providing goods or services to the local governmental entity that is properly executed on behalf of the local governmental entity.

(3) "Local governmental entity" means a political subdivision of this state, other than a county or a unit of state government, as that term is defined by Section 2260.001, Government Code, including a:

(A) municipality; (B) public school district and junior college district; and (C) special-purpose district or authority, including any levee improvement district, drainage district, irrigation district, water improvement district, water control and improvement district, water control and preservation district, freshwater supply district, navigation district, conservation and reclamation district, soil conservation district, communication district, public health district, emergency service organization, and river authority.

Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

§ 271.152. Waiver ofimmunity to Suit for Certain Claims A local governmental entity that is authorized by statute or the constitution to enter into a contract and that enters into a contract subject to this subchapter waives sovereign immunity to suit for the purpose of adjudicating a claim for breach of the contract, subject to the terms and conditions of this subchapter. Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

549

PURCHASING & CONTRACTING AUTHORITY § 271.153 Ch. 271 Historical and Statutory Notes Section 2 of Acts 2005, 79th Leg., ch. 604 not been waived with respect to the claim beprovides : fore the effective date of this Act. A claim that arises under a contract executed before the ef-

"Sections 271.152, 271.153, and 271.154, Lo- fective date of this Act and with respect to cal Government Code, as added by this Act, which sovereign immunity has been waived is apply to a claim that arises under a contract governed by the law in effect on the date the executed before the effective date [Sept. 1, contract was executed, and the former law is 2005] of this Act only if sovereign immunity has continued in effect for that purpose."

Library References Municipal Corporations 0::>254. Westlaw Topic No. 268. C.J.S. Municipal Corporations § 946.

§ 271.153. Limitations on Adjudication Awards (a) The total amount of money awarded in an adjudication brought against a local governmental entity for breach of a contract subject to this subchapter is limited to the following:

(1) the balance due and owed by the local governmental entity under the contract as it may have been amended, including any amount owed as compensation for the increased cost to perform the work as a direct result of owner-caused delays or acceleration;

(2) the amount owed for change orders or additional work the contractor is directed to perform by a local governmental entity in connection with the contract; and (3) interest as allowed by law. (b) Damages awarded in an adjudication brought against a local governmental entity arising under a contract subject to this subchapter may not include:

(1) consequential damages, except as expressly allowed under Subsection (a)(l );

(2) exemplary damages; or (3) damages for unabsorbed home office overhead.

Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

Historical and Statutory Notes Section 2 of Acts 2005, 79th Leg., ch. 604 not been waived with respect to the claim beprovides : fore the effective date of this Act. A claim that arises under a contract executed before the ef-

"Sections 271.152, 271.153, and 271.154, Lo- fective date of this Act and with respect to cal Government Code, as added by this Act, which sovereign immunity has been waived is apply to a claim that arises under a contract governed by the law in effect on the date the executed before the effective date [Sept. 1, contract was executed, and the former law is 2005] of this Act only if sovereign immunity has continued in effect for that purpose."

Library References Municipal Corporations 0::>254. Westlaw Topic No. 268. C.J.S. Municipal Corporations § 946.

550

§ 271.154 PROPERTY ACQUISITION, SALE, OR LEASE Title 8 § 2 71.15 4. Contractual Adjudication Procedures Enforceable Adjudication procedures, including requirements for serving notices or engaging in alternative dispute resolution proceedings before bringing a suit or an arbitration proceeding, that are stated in the contract subject to this subchapter or that are established by the local governmental entity and expressly incorporated into the contract or incorporated by reference are enforceable except to the extent those procedures conflict with the terms of this subchapter. Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

Historical and Statutory Notes Section 2 of Acts 2005, 79th Leg., ch. 604 not been waived with respect to the claim . b.e- provides: fore the effective date of this Act. A claim that arises under a contract executed before the ef-

"Sections 271.152, 271.153, and 271.154, Lo- fective date of this Act and with respect to cal Government Code, as addeci by this Act, which sovereign immunity .~s been waived is apply to a claim that arises under a contract governed by the law in effecCoii the daie-tlie executed before the effective date [Sept. 1, contract was executed, and the former law is 2005] of th.!!;.~_C:L~l}h~_if_§g"er.ejgn immunity has_ continued in effect for that purpose."

Library References Municipal Corporations ~254. Westlaw Topic No. 268. C.J.S. Municipal Corporations§ 946.

§ 271.155. No Waiver of Other Defenses This subchapter does not waive a defense or a limitation on damages available to a party to a contract, other than a bar against suit based on sovereign immunity.

Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

§ 271.156. No Waiver oflmmunity to Suit in Federal Court This subchapter does not waive sovereign immunity to suit in federal court.

Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

§ 2 71.15 7. No Waiver of Immunity to Suit for Tort Liability This subchapter does not waive sovereign immunity to suit for a cause of action for a negligent or intentional tort.

Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

Library References Municipal Corporations ~723. Westlaw Topic No. 268. C.J.S. Municipal Corporations §§ 661 to 663.

551

PURCHASING & CONTRACTING AUTHORITY § 271.901 Ch. 271 § 271.158. NoGrantoflmmunitytoSuit Nothing in this subchapter shall constitute a grant of immunity to suit to a local governmental entity. Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

§ 271.159. No Recovery of Attorney's Fees Attorney's fees incurred by a local governmental entity or any other party in the adjudication of a claim by or against a local governmental entity shall not be awarded to any party in the adjudication unless the local governmental entity has entered into a written agreement that expressly authorizes the prevailing party in the adjudication to recover its reasonable and necessary attorney's fees by specific reference to this section. Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

Library References Municipal Corporations G:o>254. Westlaw Topic No. 268. C.J.S. Municipal Corporations§ 946.

§ 271.160. Joint Enterprise A contract entered into by a local government entity is not a joint enterprise for liability purposes. Added by Acts 2005, 79th Leg., ch. 604, § 1, eff. Sept. 1, 2005.

[Sections 2 71.161 to 2 71.900 reserved for expansion]

SUBCHAPTER Z. MISCELLANEOUS PROVISIONS

§ 271.901. Procedure for Awarding Contract if Municipality or District Receives Identical Bids (a) If a municipality or district is required to accept bids on a contract and receives two or more bids from responsible bidders that are identical, in nature and amount, as the lowest and best bids, the governing body of the municipality or district shall enter into a contract with only one of those bidders and must reject all other bids.

(b) If only one of the bidders submitting identical bids is a resident of the municipality or district, the municipality or district must select that bidder. If two or more of the bidders submitting identical bids are residents of the municipality or district, the municipality or district must select one of those bidders by the casting of lots. In all other cases, the municipality or district must select from the identical bids by the casting of lots.

(c) The casting of lots must be in a manner prescribed by the mayor of the municipality or the governing body of the district and must be conducted in the

TAB 43

Texas Civil Practices and Remedies Code §16.071

V.T.C.A., Civil Practice & Remedies Code § 16.071 Page 1

Effective:[See Text Amendments]

Vernon's Texas Statutes and Codes Annotated Currentness Civil Practice and Remedies Code (Refs & Annos)

Title 2. Trial, Judgment, and Appeal Subtitle B. Trial Matters Chapter 16. Limitations Subchapter D. Miscellaneous Provisions § 16.071. Notice Requirements

(a) A contract stipulation that requires a claimant to give notice of a claim for damages as a condition precedent to the right to sue on the contract is not valid unless the stipulation is reasonable. A stipulation that requires notification within less than 90 days is void.

(b) If notice is required, the claimant may notify any convenient agent of the company that requires the notice.

(c) A contract stipulation between the operator of a railroad, street railway, or interurban railroad and an employee or servant of the operator is void if it requires as a condition precedent to liability:

(1) the employee or servant to notify the system of a claim for damages for personal injury caused by negligence; or

(2) the spouse, parent, or child of a deceased employee or servant to notify the system of a claim of death caused by negligence.

(d) This section applies to a contract between a federal prime contractor and a subcontractor, except that the notice period stipulated in the subcontract may be for a period not less than the period stipulated in the prime contract, minus seven days.

(e) In a suit covered by this section or Section 16.070, it is presumed that any required notice has been given unless lack of notice is specifically pleaded under oath.

(f) This section does not apply to a contract relating to the sale or purchase of a business entity if a party to the contract pays or receives or is obligated to pay or receive consideration under the contract having an aggregate value of not less than $500,000.

CREDIT(S)

© 2013 Thomson Reuters. No Claim to Orig. US Gov. Works.

V.T.C.A., Civil Practice & Remedies Code § 16.071 Page 2

Acts 1985, 69th Leg., ch. 959, § 1, eff. Sept. 1, 1985. Amended by Acts 1991, 72nd Leg., ch. 840, § 3, eff. Aug. 26, 1991.

Current through Chapters effective immediately through Chapter 65 of the 2013 Regular Session of the 83rd Legislature

(c) 2013 Thomson Reuters. No Claim to Orig. US Gov. Works.

END OF DOCUMENT

© 2013 Thomson Reuters. No Claim to Orig. US Gov. Works.